Op-Ed Contributor
Wall Street Smarts
By CALVIN TRILLINPublished: October 13, 2009
“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”
The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.
“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”
He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.
“O.K.,” I said. “Let’s hear it.”
“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.
“But weren’t there smart guys on Wall Street in the first place?” I asked.
He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said. “One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”
I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks.
“That actually sounds more or less accurate,” I said.
“Of course it’s accurate,” he said. “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”
“So what happened?”
“I told you what happened. Smart guys started going to Wall Street.”
“Why?”
“I thought you’d never ask,” he said, making a practiced gesture with his eyebrows that caused the bartender to get started mixing another martini.
“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”
“But you still haven’t told me how that brought on the financial crisis.”
“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”
“Why do I get the feeling that there’s one more step in this scenario?” I said.
“Because there is,” he said. “When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”
“So having smart guys there almost caused Wall Street to collapse.”
“You got it,” he said. “It took you awhile, but you got it.”
The theory sounded too simple to be true, but right offhand I couldn’t find any flaws in it. I found myself contemplating the sort of havoc a horde of smart guys could wreak in other industries. I saw those industries falling one by one, done in by superior intelligence. “I think I need a drink,” I said.
He nodded at my glass and made another one of those eyebrow gestures to the bartender. “Please,” he said. “Allow me.”
Calvin Trillin is the author, most recently, of “Deciding the Next Decider: The 2008 Presidential Race in Rhyme.”
http://www.nytimes.com/2009/10/14/opinion/14trillin.html?_r=1
Wednesday 14 October 2009
FTSE 100 back above 5,200 as gold hits new record high
The FTSE 100 rallied back above 5,200 as investors took heart at strong US corporate results and encouraging economic news from China and a weak dollar pushed gold to a fresh record high.
Published: 3:42PM BST 14 Oct 2009
FTSE 100
London's index of leading shares rose 1.7pc to 5241 as investors ploughed back into the market, lifted by positive results from US bank JP Morgan and chipmaker Intel.
The dollar slumped to a fresh 14-month low against other major currencies as investors' appetite for risk increased, sending gold to another record high of $1,072 an ounce.
Oil prices rose above $75 a barrel in New York for the first time in a year.
Miners surged in London after China said its slump in exports eased in September, offering a further sign that global trade is improving. Kazakhmys, up 8.4pc to £12.78, was the leading riser in the blue chip index.
Rio Tinto (up 4pc) fuelled this view after it raised full-year production targets on the back of continued strong demand from Chinese steelmakers.
Barclays , Royal of Scotland and Lloyds Banking Group got a boost from a sevenfold rise in third-quarter profits to $3.6bn at JP Morgan.
The bank's bumper profits and a better-than-expected 5pc fall in Intel's third-quarter profits to $1.9bn pushed Wall Street back toward 10,000. America's blue chip index was up nearly 1pc at 9954 in early trading.
http://www.telegraph.co.uk/finance/markets/6327173/FTSE-100-back-above-5200-as-gold-hits-new-record-high.html
Published: 3:42PM BST 14 Oct 2009
FTSE 100
London's index of leading shares rose 1.7pc to 5241 as investors ploughed back into the market, lifted by positive results from US bank JP Morgan and chipmaker Intel.
The dollar slumped to a fresh 14-month low against other major currencies as investors' appetite for risk increased, sending gold to another record high of $1,072 an ounce.
Oil prices rose above $75 a barrel in New York for the first time in a year.
Miners surged in London after China said its slump in exports eased in September, offering a further sign that global trade is improving. Kazakhmys, up 8.4pc to £12.78, was the leading riser in the blue chip index.
Rio Tinto (up 4pc) fuelled this view after it raised full-year production targets on the back of continued strong demand from Chinese steelmakers.
Barclays , Royal of Scotland and Lloyds Banking Group got a boost from a sevenfold rise in third-quarter profits to $3.6bn at JP Morgan.
The bank's bumper profits and a better-than-expected 5pc fall in Intel's third-quarter profits to $1.9bn pushed Wall Street back toward 10,000. America's blue chip index was up nearly 1pc at 9954 in early trading.
http://www.telegraph.co.uk/finance/markets/6327173/FTSE-100-back-above-5200-as-gold-hits-new-record-high.html
Time for rate increases is approaching
Near-zero policy interest rates are powerful. If the claims of financial economists are to be believed, they are holding up economic activity and bank balance sheets. But their magic isn’t only beneficial. They also distort behaviour in dangerous ways.
By Edward Hadas, Breakingviews.com
Published: 1:13PM BST 14 Oct 2009
The US Federal Reserve, still the world leader in central banking, has kept its overnight policy rate at 0pc-0.25pc for 10 months and is in no hurry to change. Ultra-low rates will be needed for an “extended period”, says Donald Kohn, the Fed’s vice chairman.
Most central bankers don’t think zero is actually low enough to deal with weak economic activity, high unemployment, low confidence and a still fragile banking system. In the standard calculation, current conditions are so dire that people and companies should be paid to spend money. But zero rates are better than nothing, so to speak. Central banks are at least not doing anything to impede lending.
That’s the theory. But with the financial system still in post-traumatic shock, it’s not certain that the ultra-low policy rates are getting through the banks and into the real economy. Business lending remains weak.
Even if the aggressively low rates are helping activity, the gains come with losses. The financial infrastructure is being undermined. Central bankers think almost entirely about the incentive to borrow, but non-zero rates also create an incentive to save. When the policy rate is zero, so is the incentive. A prolonged period of nearly free official money makes it hard to recreate a much needed culture of savings in the US and UK.
Also, whether or not the transmission from policy rate to real economy is working well, financial markets seem to respond all too strongly. Commodity prices have risen sharply and the dollar and pound – the currencies of the central banks most committed to ultra-cheap money – are dropping.
Ultra-low rates were justified, despite the risks, when GDP and trade were in freefall and banks were gasping for support. But conditions are now more stable. The risks are starting to outweigh the rewards. Central bankers should put rate increases back on the agenda.
http://www.telegraph.co.uk/finance/breakingviewscom/6325982/Time-for-rate-increases-is-approaching.html
By Edward Hadas, Breakingviews.com
Published: 1:13PM BST 14 Oct 2009
The US Federal Reserve, still the world leader in central banking, has kept its overnight policy rate at 0pc-0.25pc for 10 months and is in no hurry to change. Ultra-low rates will be needed for an “extended period”, says Donald Kohn, the Fed’s vice chairman.
Most central bankers don’t think zero is actually low enough to deal with weak economic activity, high unemployment, low confidence and a still fragile banking system. In the standard calculation, current conditions are so dire that people and companies should be paid to spend money. But zero rates are better than nothing, so to speak. Central banks are at least not doing anything to impede lending.
That’s the theory. But with the financial system still in post-traumatic shock, it’s not certain that the ultra-low policy rates are getting through the banks and into the real economy. Business lending remains weak.
Even if the aggressively low rates are helping activity, the gains come with losses. The financial infrastructure is being undermined. Central bankers think almost entirely about the incentive to borrow, but non-zero rates also create an incentive to save. When the policy rate is zero, so is the incentive. A prolonged period of nearly free official money makes it hard to recreate a much needed culture of savings in the US and UK.
Also, whether or not the transmission from policy rate to real economy is working well, financial markets seem to respond all too strongly. Commodity prices have risen sharply and the dollar and pound – the currencies of the central banks most committed to ultra-cheap money – are dropping.
Ultra-low rates were justified, despite the risks, when GDP and trade were in freefall and banks were gasping for support. But conditions are now more stable. The risks are starting to outweigh the rewards. Central bankers should put rate increases back on the agenda.
http://www.telegraph.co.uk/finance/breakingviewscom/6325982/Time-for-rate-increases-is-approaching.html
"Four Bad Bears" comparison.
Bear Turns to Bull?
October 13, 2009 updated each market day
The S&P 500 closed the day 58.6% above the March 9th low, which is 31.4% below the peak in October 2007.
http://dshort.com/articles/2009/bear-turns-to-bull.html
A Rising Tide Lifts All Boats
When the economy is doing well, most companies do well as a result. This is the reasoning behind this old adage. If you ignore rising tides in economies, industries, and sectors, you could miss out on big profits. Missing out on these types of profits can hurt you because trend following is one of the easiest and most reliable investing strategies (as long as you're not the last one that follows).
If you see trends forming early on in any market, and invest in that market, you can make a very nice profit. The important part again, is to do your homework to identify the most credible trends and take advantage of them before anyone else. The earlier you get in on an upward trend, the better off you'll be.
But also be aware of the other adage: "the financial genius in a rising market."
If you see trends forming early on in any market, and invest in that market, you can make a very nice profit. The important part again, is to do your homework to identify the most credible trends and take advantage of them before anyone else. The earlier you get in on an upward trend, the better off you'll be.
But also be aware of the other adage: "the financial genius in a rising market."
What is the most important question for a stockmarket investor?
What is the most important question for a stockmarket investor?
Whether the market is undervalued or overvalued? No!
Whether interest rates will go up or down? No!
Whether a particular company is undervalued or overvalued? No!
Whether you should buy ABC or XYZ? No!
Whether Joe Bloggs, the famous analyst, says it is a great buy? No!
Tempting as it is to look for answers to these, we will soon see that they are misleading.
Yet, there are whole office buildings full of people pumping out answers to these questions. From their side they are not trying to mislead you. They are just trying to supply answers to these questions because people keep asking them and are willing to pay large amounts of money for the answers.
Even if they could be answered, the answers will not help you reach your financial goals. Why? Because they are the wrong questions.
Warren Buffett said that he has no idea what the market is going to do and whether it is undervalued or overvalued, whatever that may mean. What is more, he is not interested in knowing.
The same applies to interest rates. Buffett once said, "If the Federal Reserve Chairman Alan Greenspan were to whisper to me what his monetary policy was going to be over the next two years, it wouldn't change one thing I do."
There is only one question. Underneath it all, there is only one question. What is my profit rate or percentage return going to be?
The core activity of an investor is to estimate with confidence the percentage return over a specified holding period when buying stock in a company. And you want to be able to do this based on reliable numbers and information.
http://myinvestingnotes.blogspot.com/2009/08/hidden-desire-of-investors.html
Whether the market is undervalued or overvalued? No!
Whether interest rates will go up or down? No!
Whether a particular company is undervalued or overvalued? No!
Whether you should buy ABC or XYZ? No!
Whether Joe Bloggs, the famous analyst, says it is a great buy? No!
Tempting as it is to look for answers to these, we will soon see that they are misleading.
Yet, there are whole office buildings full of people pumping out answers to these questions. From their side they are not trying to mislead you. They are just trying to supply answers to these questions because people keep asking them and are willing to pay large amounts of money for the answers.
Even if they could be answered, the answers will not help you reach your financial goals. Why? Because they are the wrong questions.
Warren Buffett said that he has no idea what the market is going to do and whether it is undervalued or overvalued, whatever that may mean. What is more, he is not interested in knowing.
The same applies to interest rates. Buffett once said, "If the Federal Reserve Chairman Alan Greenspan were to whisper to me what his monetary policy was going to be over the next two years, it wouldn't change one thing I do."
There is only one question. Underneath it all, there is only one question. What is my profit rate or percentage return going to be?
The core activity of an investor is to estimate with confidence the percentage return over a specified holding period when buying stock in a company. And you want to be able to do this based on reliable numbers and information.
http://myinvestingnotes.blogspot.com/2009/08/hidden-desire-of-investors.html
Multi-baggers
"The majority of the multi-baggers owe their stellar returns to the market “re-rating”, rather than an impressive expansion in their earnings."
The above statement is probably true for the short term. However, over the long term, multi-baggers are the result of their long term earnings growth.
The above statement is probably true for the short term. However, over the long term, multi-baggers are the result of their long term earnings growth.
Investing for the long haul: Sell the losers, let the winners run.
This is the time people should review their holdings, keep the stocks with the best potential, sell the losers (not those with the depressed prices but those whose revenues and earnings aren't capable of growing adequately), and buy others with better potential while they're selling cheap.
Sell the losers, let the winners run. But you shouldn't jump into any "hot stock" without knowing what you're doing.
Read also:
The Ultimate Hold-versus-Sell Test
http://myinvestingnotes.blogspot.com/2009/09/ultimate-test.html
Let Your Winners Run, Cut Your Losers
When you invest, it is easy to sell your successful investments and keep your failing ones. This is what comes intuitively to most investors but can end up costing you a lot of potential profits. By selling your winners too early, you could miss out on huge gains. By keeping your losers too long, you could realize many losses. This isn't always true, but it makes mathematical sense; if you keep your money in losing investments instead of winning ones, you'll more likely end up losing money.
If you have an investment that has been performing consistently well, there is no good reason to sell it. As the adage states, it is important to let your winners run. By selling too early, you could miss out on a lot more than holding onto a losing investment for too long. When holding onto a losing investment too long, you can only lose the money you initially spent. If you sell too early, you could lose many times the amount of money you initially spent. By letting your winners run, and cutting your losers, you can do much better than doing the opposite. As with all investments, it is still important to do your homework.
Sell the losers, let the winners run. But you shouldn't jump into any "hot stock" without knowing what you're doing.
Read also:
The Ultimate Hold-versus-Sell Test
http://myinvestingnotes.blogspot.com/2009/09/ultimate-test.html
Let Your Winners Run, Cut Your Losers
When you invest, it is easy to sell your successful investments and keep your failing ones. This is what comes intuitively to most investors but can end up costing you a lot of potential profits. By selling your winners too early, you could miss out on huge gains. By keeping your losers too long, you could realize many losses. This isn't always true, but it makes mathematical sense; if you keep your money in losing investments instead of winning ones, you'll more likely end up losing money.
If you have an investment that has been performing consistently well, there is no good reason to sell it. As the adage states, it is important to let your winners run. By selling too early, you could miss out on a lot more than holding onto a losing investment for too long. When holding onto a losing investment too long, you can only lose the money you initially spent. If you sell too early, you could lose many times the amount of money you initially spent. By letting your winners run, and cutting your losers, you can do much better than doing the opposite. As with all investments, it is still important to do your homework.
Be an intelligent investor through financial education
In day to day conversations, one can easily gauge that the MAJORITY of "investors" in the market are not intelligent. An intelligent investor is as defined by Benjamin Graham in his book, The Intelligent Investor.
How can these investors acquire the financial education to guide them through the stock market investment minefields? How can they acquire the investing philosophy and strategy to help them over many years (or decades) of their investing lifespan? Above all to ensure that they do not lose their money in the stock market while seeking for a reasonable return.
Inevitably, this will involve acquiring a set of RELEVANT knowledge through their reading, their interactions with the other investors, their interactions with investment professionals and the market. From personal experience, there is a huge core knowledge that has to be acquired. This is probably too overwhelming for many potential investors.
Therefore, though it is good to attend an hour's presentation on investment here and there, or even pay a small sum for a half day session on investment talk, this is not going to transform one into a intelligent investor. At best, these are introductory sessions to highlight areas of investments where you may wish to explore further. How much knowledge can be acquired in a half day presentation that you cannot acquire from a good book? At worst, you are "convinced" that you know investing when in fact the small amount of new knowledge you acquire is in fact very detrimental to your long term investing.
There is no substitute to hard work. You would need to acquire the necessary core financial and investment knowledge. You do not need very high power investment or financial knowledge. However, you do need to acquire some simple knowledge in the relevant important fields to guide your investing. Above all, you will also need to understand behavioural finance to guide your emotions.
By the way, with blogs springing up everywhere, you too have another avenue to observe investing by various individuals. Learn their good and bad habits. You will probably find some benefit reading this blog too.
Good luck in your investing.
http://myinvestingnotes.blogspot.com/2008/12/investment-philosophy-strategy-and.html
http://myinvestingnotes.blogspot.com/2009/09/investing-for-beginners.html
http://myinvestingnotes.blogspot.com/2009/08/learn-to-invest-in-10-steps.html
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html
How can these investors acquire the financial education to guide them through the stock market investment minefields? How can they acquire the investing philosophy and strategy to help them over many years (or decades) of their investing lifespan? Above all to ensure that they do not lose their money in the stock market while seeking for a reasonable return.
Inevitably, this will involve acquiring a set of RELEVANT knowledge through their reading, their interactions with the other investors, their interactions with investment professionals and the market. From personal experience, there is a huge core knowledge that has to be acquired. This is probably too overwhelming for many potential investors.
Therefore, though it is good to attend an hour's presentation on investment here and there, or even pay a small sum for a half day session on investment talk, this is not going to transform one into a intelligent investor. At best, these are introductory sessions to highlight areas of investments where you may wish to explore further. How much knowledge can be acquired in a half day presentation that you cannot acquire from a good book? At worst, you are "convinced" that you know investing when in fact the small amount of new knowledge you acquire is in fact very detrimental to your long term investing.
There is no substitute to hard work. You would need to acquire the necessary core financial and investment knowledge. You do not need very high power investment or financial knowledge. However, you do need to acquire some simple knowledge in the relevant important fields to guide your investing. Above all, you will also need to understand behavioural finance to guide your emotions.
By the way, with blogs springing up everywhere, you too have another avenue to observe investing by various individuals. Learn their good and bad habits. You will probably find some benefit reading this blog too.
Good luck in your investing.
http://myinvestingnotes.blogspot.com/2008/12/investment-philosophy-strategy-and.html
http://myinvestingnotes.blogspot.com/2009/09/investing-for-beginners.html
http://myinvestingnotes.blogspot.com/2009/08/learn-to-invest-in-10-steps.html
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html
Characteristics of ideal stock you plan to purchase
Some thoughts on Analysing Stocks
Ideally a stock you plan to purchase should have all of the following charateristics:
•A rising trend of earnings, dividends and book value per share.
•A balance sheet with less debt than other companies in its particular industry.
•A P/E ratio no higher than average.
•A dividend yield that suits your particular needs.
•A below-average dividend pay-out ratio.
•A history of earnings and dividends not pockmarked by erratic ups and downs.
•Companies whose ROE is 15 or better.
•A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.
Keep It Simple and Safe.
Also read:
8 signs of doomed stock
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html
Ideally a stock you plan to purchase should have all of the following charateristics:
•A rising trend of earnings, dividends and book value per share.
•A balance sheet with less debt than other companies in its particular industry.
•A P/E ratio no higher than average.
•A dividend yield that suits your particular needs.
•A below-average dividend pay-out ratio.
•A history of earnings and dividends not pockmarked by erratic ups and downs.
•Companies whose ROE is 15 or better.
•A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.
Keep It Simple and Safe.
Also read:
8 signs of doomed stock
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html
Tuesday 13 October 2009
Buffett's focussed investing
According to Buffett, his results follow not from any master plan but from focussed investing - allocating capital by concentrating on businesses with outstanding economic characteristics and run by first-rate manager.
It is the Business that Matters
Over the long haul, stock prices tend to track the value of the business. When firms do well, so do their shares, and when business suffers, the stock will as well. Always focus on the company's fundamental financial performance.
Analyst upgrades and chart patterns may be fine tools for traders who treat the stock market like a casino, but they're of little use to investors who truly want to build wealth in the stock market. You have to get your hands dirty and understand the businesses of the stocks you own if you hope to be a successful long-term investor.
P/S: Look at Hai-O to learn that price tracks the value of the company's business.
Analyst upgrades and chart patterns may be fine tools for traders who treat the stock market like a casino, but they're of little use to investors who truly want to build wealth in the stock market. You have to get your hands dirty and understand the businesses of the stocks you own if you hope to be a successful long-term investor.
P/S: Look at Hai-O to learn that price tracks the value of the company's business.
Great Opportunities to buy companies with durable competitive advantage
a) Correction or panic during a bull market:
Any company with a durable competitive advantage will eventually recover after a market correction or panic during a bull market.
b) Bubble-bursting situation:
But beware. In a bubble-bursting situation,during which stock prices trade in excess of 40 times earnings and then fall to single-digit PEs, it may take years for them to fully recover.
After the crash of 1997, it took until 2007 to match the 1990s bull market highs. There are still companies trading today at below their last decade high price. On the other hand, if you bought during the crash, as Warren Buffett often did, it didn't take you long to make a fortune.
Any company with a durable competitive advantage will eventually recover after a market correction or panic during a bull market.
b) Bubble-bursting situation:
But beware. In a bubble-bursting situation,during which stock prices trade in excess of 40 times earnings and then fall to single-digit PEs, it may take years for them to fully recover.
After the crash of 1997, it took until 2007 to match the 1990s bull market highs. There are still companies trading today at below their last decade high price. On the other hand, if you bought during the crash, as Warren Buffett often did, it didn't take you long to make a fortune.
Stock market creates buying opportunities
The bull/bear market cycle offers many buying opportunities for the selective contrarian investor.
The most important aspect of these buying opportunities is that they offer the investor the chance to buy into durable-competitive-advantage companies that have nothing wrong with them other than sinking stock prices.
The herd mentality of the shortsighted stock market creates buying opportunities.
The most important aspect of these buying opportunities is that they offer the investor the chance to buy into durable-competitive-advantage companies that have nothing wrong with them other than sinking stock prices.
The herd mentality of the shortsighted stock market creates buying opportunities.
One buys in a bear market and sells in a bubble.
One of the interesting differences between bubbles and bear markets is that in a bear market, there are plenty of bulls and bears. In a bubble, the few bears are drowned out by the loud and almost universal bullishness.
It is natural to like momentum and money, but if investors have no disciplines and no sense of bubbles, then they are headed not for the big money, but for quite the opposite.
With bear markets, one wants to use buy and sell disciplines and buy when prices and fundamentals would dictate that.
There are market bubbles once in a great while, perhaps once in a life-time, but individual stock bubbles are more common. All bubbles have some similarities that concern how perceptions, emotions, and a lack of accurate information combine to set an investor trap.
It is natural to like momentum and money, but if investors have no disciplines and no sense of bubbles, then they are headed not for the big money, but for quite the opposite.
With bear markets, one wants to use buy and sell disciplines and buy when prices and fundamentals would dictate that.
There are market bubbles once in a great while, perhaps once in a life-time, but individual stock bubbles are more common. All bubbles have some similarities that concern how perceptions, emotions, and a lack of accurate information combine to set an investor trap.
Beware of individual stock bubbles
With bubbles, there is an element of mystery. To cope with that, start with the first step, knowledge, and combine that with your disciplined buy and sell strategies, since in a bubble it is likely that the beliefs of the crowd cannot be supported by real knowledge.
Yet the entire crowd thought in this way about many companies because of incorrect and incomplete information. Emotions temporarily filled that void. A disciplined buy and sell strategy helps you control your emotion.
Yet the entire crowd thought in this way about many companies because of incorrect and incomplete information. Emotions temporarily filled that void. A disciplined buy and sell strategy helps you control your emotion.
Behavioral economics supplies a framework for investing
Behavioral economics has gone beyond just trying to provide explanations for why investors behave as they do. It actually supplies a framework for investing and policy making to help people avoid succumbing to emotion-based or ill-conceived investments.
“Adhering to logical, rational principles of ideal economic choice may be biologically unnatural,” says Colin F. Camerer, a professor of behavioral economics at Caltech. Better insight into human psychology gleaned by neuroscientists holds the promise of changing forever our fundamental assumptions about the way entire economies function—and our understanding of the motivations of the individual participants therein, who buy homes or stocks and who have trouble judging whether a dollar is worth as much today as it was yesterday.
http://www.scientificamerican.com/article.cfm?id=the-science-of-economic-bubbles
“Adhering to logical, rational principles of ideal economic choice may be biologically unnatural,” says Colin F. Camerer, a professor of behavioral economics at Caltech. Better insight into human psychology gleaned by neuroscientists holds the promise of changing forever our fundamental assumptions about the way entire economies function—and our understanding of the motivations of the individual participants therein, who buy homes or stocks and who have trouble judging whether a dollar is worth as much today as it was yesterday.
http://www.scientificamerican.com/article.cfm?id=the-science-of-economic-bubbles
Market bottoms
A market bottoms when we reach what is known as the "point of maximum pessimism". This means that investors have lost so much money they completely throw in the towel - and shares correct to an undervalued level.
Don't Let a Market Crash Hit You at the Finish Line
Don't Let a Market Crash Hit You at the Finish Line
by Jason Zweig
Tuesday, October 13, 2009
Can you make the risk of stocks go away just by owning them long enough? Many investors still think so.
"Over any 20-year period in history, in any market, an equity portfolio has outperformed a fixed-income portfolio," one reader recently emailed me. "Warren Buffett believes in this rule as well," he added, referring to Mr. Buffett's bullish selling of long-term put options on the Standard & Poor's 500-stock index in recent years. (Selling those puts will be profitable if U.S. stocks go up over the next decade or so.)
As the philosopher Bertrand Russell warned, you shouldn't mistake wishes for facts.
Bonds have beaten stocks for as long as two decades -- in the 20 years that ended this June 30, for example, as well as 1989 through 2008.
Nor does Mr. Buffett believe stocks are sure to beat all other investments over the next 20 years.
"I certainly don't mean to say that," Mr. Buffett told me this week. "I would say that if you hold the S&P 500 long enough, you will show some gain. I think the probability of owning equities for 25 years, and having them end up at a lower price than where you started, is probably 1 in 100."
But what about the probability that stocks will beat everything else, including bonds and inflation? "Who knows?" Mr. Buffett said. "People say that stocks have to be better than bonds, but I've pointed out just the opposite: That all depends on the starting price."
Why, then, do so many investors think stocks become safe if you simply hang on for at least 20 years?
In the past, the longer the measurement period, the less the rate of return on stocks has varied. Any given year was a crapshoot. But over decades, stocks have tended to go up at a fairly steady average annual rate of 9% to 10%. If "risk" is the chance of deviating from that average, then that kind of risk has indeed declined over very long periods.
But the risk of investing in stocks isn't the chance that your rate of return might vary from an average; it is the possibility that stocks might wipe you out. That risk never goes away, no matter how long you hang on.
The belief that extending your holding period can eliminate the risk of stocks is simply bogus. Time might be your ally. But it also might turn out to be your enemy. While a longer horizon gives you more opportunities to recover from crashes, it also gives you more opportunities to experience them.
Look at the long-term average annual rate of return on stocks since 1926, when good data begin. From the market peak in 2007 to its trough this March, that long-term annual return fell only a smidgen, from 10.4% to 9.3%. But if you had $1 million in U.S. stocks on Sept. 30, 2007, you had only $498,300 left by March 1, 2009. If losing more than 50% of your money in a year-and-a-half isn't risk, what is?
What if you retired into the teeth of that bear market? If, as many financial advisers recommend, you withdrew 4% of your wealth in equal monthly installments for living expenses, your $1 million would have shrunk to less than $465,000. You now needed roughly a 115% gain just to get back to where you started, and you were left in the meantime with less than half as much money to live on.
But time can turn out to be an enemy for anyone, not just retirees. A 50-year-old might have shrugged off the 38% fall in the U.S. stock market in 2000 to 2002 and told himself, "I have plenty of time to recover." He's now pushing 60 and, even after the market's recent bounce, still has a 27% loss from two years ago -- and is even down 14% from the beginning of 2000, according to Ibbotson Associates. He needs roughly a 38% gain just to get back to where he was in 2007. So does a 40-year-old. So does a 30-year-old.
In short, you can't count on time alone to bail you out on your U.S. stocks. That is what bonds and foreign stocks and cash and real estate are for.
In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).
Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.
Write to Jason Zweig at intelligentinvestor@wsj.com
http://finance.yahoo.com/focus-retirement/article/107943/dont-let-a-market-crash-hit-you-at-the-finish-line.html?mod=fidelity-readytoretire
by Jason Zweig
Tuesday, October 13, 2009
Can you make the risk of stocks go away just by owning them long enough? Many investors still think so.
"Over any 20-year period in history, in any market, an equity portfolio has outperformed a fixed-income portfolio," one reader recently emailed me. "Warren Buffett believes in this rule as well," he added, referring to Mr. Buffett's bullish selling of long-term put options on the Standard & Poor's 500-stock index in recent years. (Selling those puts will be profitable if U.S. stocks go up over the next decade or so.)
As the philosopher Bertrand Russell warned, you shouldn't mistake wishes for facts.
Bonds have beaten stocks for as long as two decades -- in the 20 years that ended this June 30, for example, as well as 1989 through 2008.
Nor does Mr. Buffett believe stocks are sure to beat all other investments over the next 20 years.
"I certainly don't mean to say that," Mr. Buffett told me this week. "I would say that if you hold the S&P 500 long enough, you will show some gain. I think the probability of owning equities for 25 years, and having them end up at a lower price than where you started, is probably 1 in 100."
But what about the probability that stocks will beat everything else, including bonds and inflation? "Who knows?" Mr. Buffett said. "People say that stocks have to be better than bonds, but I've pointed out just the opposite: That all depends on the starting price."
Why, then, do so many investors think stocks become safe if you simply hang on for at least 20 years?
In the past, the longer the measurement period, the less the rate of return on stocks has varied. Any given year was a crapshoot. But over decades, stocks have tended to go up at a fairly steady average annual rate of 9% to 10%. If "risk" is the chance of deviating from that average, then that kind of risk has indeed declined over very long periods.
But the risk of investing in stocks isn't the chance that your rate of return might vary from an average; it is the possibility that stocks might wipe you out. That risk never goes away, no matter how long you hang on.
The belief that extending your holding period can eliminate the risk of stocks is simply bogus. Time might be your ally. But it also might turn out to be your enemy. While a longer horizon gives you more opportunities to recover from crashes, it also gives you more opportunities to experience them.
Look at the long-term average annual rate of return on stocks since 1926, when good data begin. From the market peak in 2007 to its trough this March, that long-term annual return fell only a smidgen, from 10.4% to 9.3%. But if you had $1 million in U.S. stocks on Sept. 30, 2007, you had only $498,300 left by March 1, 2009. If losing more than 50% of your money in a year-and-a-half isn't risk, what is?
What if you retired into the teeth of that bear market? If, as many financial advisers recommend, you withdrew 4% of your wealth in equal monthly installments for living expenses, your $1 million would have shrunk to less than $465,000. You now needed roughly a 115% gain just to get back to where you started, and you were left in the meantime with less than half as much money to live on.
But time can turn out to be an enemy for anyone, not just retirees. A 50-year-old might have shrugged off the 38% fall in the U.S. stock market in 2000 to 2002 and told himself, "I have plenty of time to recover." He's now pushing 60 and, even after the market's recent bounce, still has a 27% loss from two years ago -- and is even down 14% from the beginning of 2000, according to Ibbotson Associates. He needs roughly a 38% gain just to get back to where he was in 2007. So does a 40-year-old. So does a 30-year-old.
In short, you can't count on time alone to bail you out on your U.S. stocks. That is what bonds and foreign stocks and cash and real estate are for.
In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).
Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.
Write to Jason Zweig at intelligentinvestor@wsj.com
http://finance.yahoo.com/focus-retirement/article/107943/dont-let-a-market-crash-hit-you-at-the-finish-line.html?mod=fidelity-readytoretire
Investing: When to bet the farm
Our own personalities add complexity to high-risk situations.
Bill Gurtin of Gurtin Fixed Income Management in San Diego points out the risks associated with overly emotional reactions.
"What you don't want to happen is for people to get emotional with the market," he says.
The more emotional we get, the more likely it is we will make a mistake, Gurtin explains.
A company's business prospects can be measured and evaluated statistically, but there is no easy measure for mood swings.
Before making any moves, people contemplating high-risk investments should come to grips with their emotional makeup and know how they are likely to react.
Whether considering an investment in a stock, a privately held startup or a hedge fund -- all high-risk propositions -- investors should start by digging through the details of the business case to figure out how the return on investment is likely to be generated.
Professionals, even the most seasoned, have the same emotions as everyone else. Learning the ropes professionally does not eliminate human emotion, nor does it elimate urges to buy or sell emotionally. Faced with uncertainties, the tide of emotion surges. How can one resist the surging tide of emotion? Only if one has a framework of disciplines and knowledge within. Controlling emotions and replacing them with the elements of this framework are the secret.
http://myinvestingnotes.blogspot.com/2008/08/investing-when-to-bet-farm.html
Before making any moves, people contemplating high-risk investments should come to grips with their emotional makeup and know how they are likely to react.
Yet successful investors take major risks all the time. They succeed because
- they do their research,
- can afford to lose the money they invest in high-risk schemes and
- are able to make up any losses they incur with other investments, which frequently involve complementary or counterbalancing risks.
Whether considering an investment in a stock, a privately held startup or a hedge fund -- all high-risk propositions -- investors should start by digging through the details of the business case to figure out how the return on investment is likely to be generated.
- How big a payoff might the investment produce?
- And how likely is success?
- What would the price of failure be?
- And how likely is that?
Professionals, even the most seasoned, have the same emotions as everyone else. Learning the ropes professionally does not eliminate human emotion, nor does it elimate urges to buy or sell emotionally. Faced with uncertainties, the tide of emotion surges. How can one resist the surging tide of emotion? Only if one has a framework of disciplines and knowledge within. Controlling emotions and replacing them with the elements of this framework are the secret.
http://myinvestingnotes.blogspot.com/2008/08/investing-when-to-bet-farm.html
Different PE ratios
Price = estimated EPS x PE
Estimated EPS is based on a number of assumptions about the behaviour of revenues and costs. The reliability of the EPS forecast hinges critically on how realistic are these assumptions.
The other half of the valuation exercise is concerned with the price-earnings ratio which reflects the price investors are willing to pay per cents of EPS. In essence, it represens the market's summary evaluation of a company's prospects.
We will generally use the PE ratio based on current year's expected earnings.
http://myinvestingnotes.blogspot.com/search/label/different%20PE%20ratios
Estimated EPS is based on a number of assumptions about the behaviour of revenues and costs. The reliability of the EPS forecast hinges critically on how realistic are these assumptions.
The other half of the valuation exercise is concerned with the price-earnings ratio which reflects the price investors are willing to pay per cents of EPS. In essence, it represens the market's summary evaluation of a company's prospects.
We will generally use the PE ratio based on current year's expected earnings.
http://myinvestingnotes.blogspot.com/search/label/different%20PE%20ratios
Buy low, improve your chances
The most common investing mistake is throwing good money after bad. (This refers to buying a lousy company.)
The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but paying too much for it.
http://myinvestingnotes.blogspot.com/search/label/buy%20low
The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but paying too much for it.
http://myinvestingnotes.blogspot.com/search/label/buy%20low
Investment merit at a given PRICE but not at another
PRICE: is frequently an essential element, so that a stock (and even a bond) may have investment merit at one price level but not at another.
______________________________________
Having selected the company to invest based on various parameters, the next consideration will be the price we are willing to pay for owning part of its business.
Price is always an important consideration in investing. At a certain price, the company can be acquired at a bargain, at a fair price or at a high price. Each scenario will impact on our investment returns.
http://myinvestingnotes.blogspot.com/search/label/investment%20merit
______________________________________
Having selected the company to invest based on various parameters, the next consideration will be the price we are willing to pay for owning part of its business.
Price is always an important consideration in investing. At a certain price, the company can be acquired at a bargain, at a fair price or at a high price. Each scenario will impact on our investment returns.
http://myinvestingnotes.blogspot.com/search/label/investment%20merit
KLSE STOCK MARKET PERFORMANCE IN 2008
STOCK MARKET PERFORMANCE IN 2008
Q1, 2008
The strong performance of the local stock market in the fourth quarter of 2007 continued to rally into 2008 with the Kuala Lumpur Composite Index (KLCI) touching a series of record highs before closing at the peak of 1,516.22 points on 11 January 2008. It had climbed 4.9% to emerge as the top performer in Asia. However, a sell down in regional and global market due to the lingering fears of a US triggered global recession with its origins in the US subprime and credit crunch problems, brought the KLCI to lower close of 1,357.40 points as at the end of February 2008.
Undoubtedly the biggest news in 2008 was the 12th general election held on 8 March 2008. With the ruling Barisan Nasional returned to power with only a simple majority and a total of five states falling into the opposition rule, the market reacted extremely negatively. The KLCI plunged by a hefty 123.1 points or 9.5% on 10 March 2008 on a heavy volume of 1.18 billion shares traded,recording its biggest daily losses. The recovery of regional and global equity markets, however helped to mitigate the situation. KLCI managed to close higher at 1,247.52 points as at the end of March 2008, down 13.7% for the first quarter of 2008.
Q2, 2008
While the rise was in line with the recovery of regional and global equity, it was still 1.3% below the pre-general election closed of 1,296.33 points on 7 March 2008. The KLCI continued to edge higher in early May 2008, reaching a second quarter high of 1,300.67 points on 16 May 2008. In mid May till end of June 2008, it came under further selling pressure due to many factors, led by cost push inflationary pressure from higher petrol prices and increase in electricity tariffs that dampened economic growth. Consequently, the KLCI slipped into an extended period of bearish sentiment and ended the first half of 2008 at 1,186.57 points, a drop of 258.80 points or by 17.9%.
Q3, 2008
The downward trend continued into the third quarter of 2008 amidst the contagion fears following concerns of the financial crisis in the US and Europe. Much of the weakness in the global equity markets was caused by the uncertainties over the health of US economy. The string of highly published failures of large financial institutions in the US sent shock waves through the global financial markets and further aggravated the market sentiments. The KLCI fell below 1,000 points on 18 September 2008 to close at 991.66 points. Although it recovered slightly to record at 1,018.08 points at the close of third quarter, it shed 14.1% for the quarter.
Q4, 2008
At the start of the fourth quarter, KLCI retreated further in tandem with the sharp fall of the global and regional equity markets. Despite the corrective measures introduced by Governments and Central Banks worldwide to cut interest rate and inject massive liquidity into the financial system, the dysfunctional global credit market continued to generate fears of global recession. The KLCI reacted adversely falling into a four year low of 829.41 points on 29 October 2008. It however, recovered when US Federal reserve cut interest rate by 50 basis points to 1.0% on 29 October 2008.
The KLCI continued to recover following the US and regional equity market and closed the fourth quarter at 876.75 points, recording again of 5.7% from 829.41 points on 29 October 2008.
The year 2008 was indeed a roller coaster year. The outlook for the stock market in 2009 remains challenging. Fears of a global recession will continue to pervade in the first half of 2009. The US economic downturn along with falling commodity and oil prices is expected to have a negative effect on Malaysia’s export. Combined with a lower GDP growth outlook for 2009, the current consensus is only for a 3.6% upside for the KLCI.
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
(Page 81/217)
Q1, 2008
The strong performance of the local stock market in the fourth quarter of 2007 continued to rally into 2008 with the Kuala Lumpur Composite Index (KLCI) touching a series of record highs before closing at the peak of 1,516.22 points on 11 January 2008. It had climbed 4.9% to emerge as the top performer in Asia. However, a sell down in regional and global market due to the lingering fears of a US triggered global recession with its origins in the US subprime and credit crunch problems, brought the KLCI to lower close of 1,357.40 points as at the end of February 2008.
Undoubtedly the biggest news in 2008 was the 12th general election held on 8 March 2008. With the ruling Barisan Nasional returned to power with only a simple majority and a total of five states falling into the opposition rule, the market reacted extremely negatively. The KLCI plunged by a hefty 123.1 points or 9.5% on 10 March 2008 on a heavy volume of 1.18 billion shares traded,recording its biggest daily losses. The recovery of regional and global equity markets, however helped to mitigate the situation. KLCI managed to close higher at 1,247.52 points as at the end of March 2008, down 13.7% for the first quarter of 2008.
Q2, 2008
While the rise was in line with the recovery of regional and global equity, it was still 1.3% below the pre-general election closed of 1,296.33 points on 7 March 2008. The KLCI continued to edge higher in early May 2008, reaching a second quarter high of 1,300.67 points on 16 May 2008. In mid May till end of June 2008, it came under further selling pressure due to many factors, led by cost push inflationary pressure from higher petrol prices and increase in electricity tariffs that dampened economic growth. Consequently, the KLCI slipped into an extended period of bearish sentiment and ended the first half of 2008 at 1,186.57 points, a drop of 258.80 points or by 17.9%.
Q3, 2008
The downward trend continued into the third quarter of 2008 amidst the contagion fears following concerns of the financial crisis in the US and Europe. Much of the weakness in the global equity markets was caused by the uncertainties over the health of US economy. The string of highly published failures of large financial institutions in the US sent shock waves through the global financial markets and further aggravated the market sentiments. The KLCI fell below 1,000 points on 18 September 2008 to close at 991.66 points. Although it recovered slightly to record at 1,018.08 points at the close of third quarter, it shed 14.1% for the quarter.
Q4, 2008
At the start of the fourth quarter, KLCI retreated further in tandem with the sharp fall of the global and regional equity markets. Despite the corrective measures introduced by Governments and Central Banks worldwide to cut interest rate and inject massive liquidity into the financial system, the dysfunctional global credit market continued to generate fears of global recession. The KLCI reacted adversely falling into a four year low of 829.41 points on 29 October 2008. It however, recovered when US Federal reserve cut interest rate by 50 basis points to 1.0% on 29 October 2008.
The KLCI continued to recover following the US and regional equity market and closed the fourth quarter at 876.75 points, recording again of 5.7% from 829.41 points on 29 October 2008.
The year 2008 was indeed a roller coaster year. The outlook for the stock market in 2009 remains challenging. Fears of a global recession will continue to pervade in the first half of 2009. The US economic downturn along with falling commodity and oil prices is expected to have a negative effect on Malaysia’s export. Combined with a lower GDP growth outlook for 2009, the current consensus is only for a 3.6% upside for the KLCI.
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
(Page 81/217)
Rubber Glove Companies
Latexx appears to be succeeding in its aggressive growth plan. It is expected to post strong growth until 2012 as it ramps up current production capacity of 5.2 billion pieces a year to six billion pieces by the end of this year, 7.5 billion by 2010 and nine billion by 2012.
Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies. Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand. All its facilities are located in Kamunting, which ensures better quality control and lower operating costs.
Adventa has a 15% share of the global surgical glove market. As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.
From the edge newspaper: Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists. Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times.
Rubber glove companies offer a rare combination of being defensive and offering growth. Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.
Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)
Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies. Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand. All its facilities are located in Kamunting, which ensures better quality control and lower operating costs.
Adventa has a 15% share of the global surgical glove market. As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.
From the edge newspaper: Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists. Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times.
Rubber glove companies offer a rare combination of being defensive and offering growth. Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.
Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)
Fraser and Neave
Fraser and Neave Ltd: Its Malaysian Unit expects to double its revenue in Thailand and countries in Indochina to RM 2 billion within five years. Bernama reported, citing the unit's CEO Tan Ang Meng.
Sunday 11 October 2009
Reviewing LPI CAPITAL BHD share price performance in 2008
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
Read: Page 80/217 to 87/217
LPI CAPITAL BHD SHARE PRICE PERFORMANCE IN 2008
Q1, 2008
LPI Capital Bhd share price rose from RM12.10 as at 31 December 2007 to a year high of RM12.70 on 14 February 2008 following the announcement of its 2007 results on 13 February 2008. With its improved results, LPI Capital declared a final dividend of 55 sen per share less 26% income tax and a special dividend of 25% per share less 26% income tax. With the interim dividend of 30 sen less income tax of 26%, the total gross dividend declared for the year was 110 sen per share. The ex-dividend price was RM12.20 traded on 15 February 2008.
A sell down in regional and global equity market triggered by the sub-prime and credit crunch problems in US and coupled with results of the 12th general election held on 8 March 2008, LPI Capital share price fell to close at a low for the first quarter of 2008 at RM10.80 on 10 March 2008. This was the lowest price recorded for the first quarter of 2008.
The share price of LPI Capital remained at this level for the next two weeks before gradually improved in line with the general up trend of the KLCI to reach RM11.20 on the close of the first quarter.
Q2, 2008
The early second quarter saw LPI Capital share price hovering around RM11.30 and began to edge upward reaching RM12.30 on 13 May 2008. In line with the decline in local and regional equity markets on concerns of the rising inflation rate due to the increase in crude oil prices, LPI Capital share price corrected to RM11.80 at the close of the second quarter.
Q3, 2008
When the improved second quarter results were announced together with an interim dividend of 30% less 26% income tax on 10 July 2008, LPI Capital share price traded upwards moderately. After the payment of dividend the share prices consolidated to RM11.00 and this level was maintained till the middle of September. Thereafter the string of highly published failures of large financial institutions in US began to hound the equity markets and LPI Capital share price started to trend downwards in the last weeks of the third quarter. The share price closed at RM10.40 shedding a 9.5% in value.
Q4, 2008
In the last quarter of the year share prices in the regional and global stock market experienced sharp decline on the concerns of the fallout of the global financial crisis and global recession.
In tandem with the lower KLCI, LPI Capital share retreated to a year low of RM8.20 on 29 October 2008 before recovering and closed at RM9.45 for the year ending 31 December 2008.
In 2008, LPI Capital’s value in terms of market capitalisation declined by 21.25% or RM353.7 million to RM1,310.9 million compared to the decline of 39.3% of the KLCI. Based on the closing price on 31 December 2008 of RM9.45 and on the total gross dividend of 110 sen paid during the year, the shareholders would have enjoyed a gross dividend yield of 14% for 2008.
Read: Page 80/217 to 87/217
LPI CAPITAL BHD SHARE PRICE PERFORMANCE IN 2008
Q1, 2008
LPI Capital Bhd share price rose from RM12.10 as at 31 December 2007 to a year high of RM12.70 on 14 February 2008 following the announcement of its 2007 results on 13 February 2008. With its improved results, LPI Capital declared a final dividend of 55 sen per share less 26% income tax and a special dividend of 25% per share less 26% income tax. With the interim dividend of 30 sen less income tax of 26%, the total gross dividend declared for the year was 110 sen per share. The ex-dividend price was RM12.20 traded on 15 February 2008.
A sell down in regional and global equity market triggered by the sub-prime and credit crunch problems in US and coupled with results of the 12th general election held on 8 March 2008, LPI Capital share price fell to close at a low for the first quarter of 2008 at RM10.80 on 10 March 2008. This was the lowest price recorded for the first quarter of 2008.
The share price of LPI Capital remained at this level for the next two weeks before gradually improved in line with the general up trend of the KLCI to reach RM11.20 on the close of the first quarter.
Q2, 2008
The early second quarter saw LPI Capital share price hovering around RM11.30 and began to edge upward reaching RM12.30 on 13 May 2008. In line with the decline in local and regional equity markets on concerns of the rising inflation rate due to the increase in crude oil prices, LPI Capital share price corrected to RM11.80 at the close of the second quarter.
Q3, 2008
When the improved second quarter results were announced together with an interim dividend of 30% less 26% income tax on 10 July 2008, LPI Capital share price traded upwards moderately. After the payment of dividend the share prices consolidated to RM11.00 and this level was maintained till the middle of September. Thereafter the string of highly published failures of large financial institutions in US began to hound the equity markets and LPI Capital share price started to trend downwards in the last weeks of the third quarter. The share price closed at RM10.40 shedding a 9.5% in value.
Q4, 2008
In the last quarter of the year share prices in the regional and global stock market experienced sharp decline on the concerns of the fallout of the global financial crisis and global recession.
In tandem with the lower KLCI, LPI Capital share retreated to a year low of RM8.20 on 29 October 2008 before recovering and closed at RM9.45 for the year ending 31 December 2008.
In 2008, LPI Capital’s value in terms of market capitalisation declined by 21.25% or RM353.7 million to RM1,310.9 million compared to the decline of 39.3% of the KLCI. Based on the closing price on 31 December 2008 of RM9.45 and on the total gross dividend of 110 sen paid during the year, the shareholders would have enjoyed a gross dividend yield of 14% for 2008.
KNM adds RM155m to order book
KNM adds RM155m to order book
Tags: Borsig Boiler Systems GmbH | Jebel Ali Free Zone | KNM Group Bhd | new orders
Written by The Edge Financial Daily
Tuesday, 06 October 2009 00:29
KUALA LUMPUR: KNM GROUP BHD []’s wholly owned units in Malaysia, Germany and Dubai, have collectively secured RM155 million worth of new orders from Sept 24 to Oct 5, the company said on Oct 5.
KNM said FBM-KNM FZCO, a unit incorporated in Dubai’s Jebel Ali Free Zone, won a contract from Danieli & C Officine Meccantiche SpA for reactor vessels for the Gulf Steel Plant project in Egypt; KNM’s Germany-incorporated Borsig Boiler Systems GmbH won an order for the engineering, supply and installation of steam boilers at Chemelot Industrial Estate in Geleen, Netherlands, from EdeA VOF; while KNM Process Systems’ contract was from Technip Italy SpA, for shop assembly columns for the Jubail Export Refinery project in Saudi Arabia.
KNM expects the orders to contribute positively to its earnings for the years ending Dec 31, 2009 and 2010.
KNM added 1.5 sen to 76 sen with 19.05 million shares done on Oct 5.
http://www.theedgemalaysia.com/business-news/150666-knm-adds-rm155m-to-order-book.html
Tags: Borsig Boiler Systems GmbH | Jebel Ali Free Zone | KNM Group Bhd | new orders
Written by The Edge Financial Daily
Tuesday, 06 October 2009 00:29
KUALA LUMPUR: KNM GROUP BHD []’s wholly owned units in Malaysia, Germany and Dubai, have collectively secured RM155 million worth of new orders from Sept 24 to Oct 5, the company said on Oct 5.
KNM said FBM-KNM FZCO, a unit incorporated in Dubai’s Jebel Ali Free Zone, won a contract from Danieli & C Officine Meccantiche SpA for reactor vessels for the Gulf Steel Plant project in Egypt; KNM’s Germany-incorporated Borsig Boiler Systems GmbH won an order for the engineering, supply and installation of steam boilers at Chemelot Industrial Estate in Geleen, Netherlands, from EdeA VOF; while KNM Process Systems’ contract was from Technip Italy SpA, for shop assembly columns for the Jubail Export Refinery project in Saudi Arabia.
KNM expects the orders to contribute positively to its earnings for the years ending Dec 31, 2009 and 2010.
KNM added 1.5 sen to 76 sen with 19.05 million shares done on Oct 5.
http://www.theedgemalaysia.com/business-news/150666-knm-adds-rm155m-to-order-book.html
Secretive gathering of ships off coast of Malaysia
Secretive gathering of ships off coast of Malaysia
Written by South China Morning Post
Monday, 05 October 2009 12:25
HONG KONG: In the soupy green tropical waters that lap the jungle shores of southern Malaysia, a lone Indian officer in a peaked cap glares anxiously down from the 280-metre-long deck of a towering container ship anchored alongside countless other idle vessel.
As our ramshackle wooden fishing boat bobs up and down on the waves, perilously close to the ship, he shoos us away and then, spotting the photographer, scurries back into the echoing vastness of the vessel he has been left to look after almost by himself.
Navigating a precarious course around the hull of the Panama-registered ship, we reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ships sit high in the water.
Nearby, as we meander in searing midday heat and dripping humidity between the hulls of silent ships, a young European officer peers curiously at us from the bridge of an oil tanker owned by Maersk, the world's biggest container shipping line. We ask to go on board, but are waved away by two Indian crewmen. "No one is supposed to be here and they are very frightened of pirates," explains our captain.
Here, on a sleepy stretch of shoreline, we have tracked down what might count as the biggest and most secretive gathering of ships in maritime history. Over the past year, as the global economic crisis has deepened, hundreds of container ships, bulk carriers and oil tankers have congregated, drawing an iron curtain along more than 30 kilometres of Johor state coastline.
With its palm-fringed sandy beaches and lush hinterland, this could be an enticing destination for tourists. Instead, a forbidding armada of steel has sailed quietly in from around the world to transform it into a last resort for the global shipping industry.
Offshore from the bamboo huts and fishing villages, between 300 and 500 vessels, equivalent to the United States and British navies combined, have gathered. It's a remarkable sight and one that shipowners and government economists would prefer you not to see. This vast "ghost fleet" - which, in better times, would have been steaming fully laden between China, Europe and the US to stock shops ahead of Christmas - is symbolic of the depths of the sickness still ravaging the world's economies.
"We know the ships are anchored out there somewhere but we aren't sure exactly where," an officer from one of the sailors' unions in Singapore told us. "People have flown over the area and talked of seeing a massive number of ships off the coast of Malaysia, so that's probably the place to look." And it is.
With the waters of Singapore already teeming with ships paying hefty anchorage fees, idle vessels are instead being anchored in shallow international waters between the southern coast of Malaysia and the Indonesian island of Batam.
Fisherman Ah Wat, 42, who lives in Sungai Rengit, Johor, says: "Before, there was nothing out there - just sea. Then the big ships suddenly came one day, and every day there are more of them. Some of them stay for a few weeks and then go away. But most of them just stay. You used to look from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon."
The size of the idle fleet is so great you can only begin to guess at its number when the ships' lights are switched on after sunset. Seen from the shore, a blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts is a surreal and disorienting experience, making you feel as if you are adrift on a dark sea staring at an illuminated city.
"We don't understand why they are here," says Ah Wat. "There are so many ships - there must be nearly 500 out there - but no one seems to be on board. When we sail past them in our fishing boats, we never see anyone.
"They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships."
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong, says: "A couple of years ago, those ships would have been steaming back and forth, going at full speed, but now you have got something like 12 per cent of the world's container ships currently doing nothing."
Shipowners choose to anchor vessels in waters close to Singapore because it is well positioned for key global trade routes when the economy revives, Huxley says. It is also seen as a safe haven because of the region's benign climate and relatively low typhoon count.
Business for bulk carriers has picked up slightly in recent months, largely because of the mainland's revived appetite for raw materials such as iron ore, says Huxley, but this is a small part of international business, and the prospects for the container trade remain bleak. Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in what Maersk calls a "crisis of historic dimensions". Last month, the company reported its first half-year loss since it was founded, 105 years ago.
Martin Stopford, managing director of Clarksons, London's biggest ship broker, says: "In 2006 and 2007, [container] trade was growing at 11 per cent. In 2008, it slowed down by 4.7 per cent. This year we think it might go down by as much as 8 per cent. Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere."
Trade is slowing because retailers in the West are running on very low stock levels, not only because they expect consumer spending to be down, even ahead of Christmas, but also because their levels of credit have shrunk, so they are unable to keep large stockpiles.
Stopford explains: "Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tonnes of cargo a year. That's more than one tonne per person and probably two to three tonnes for richer people like us in the West. If the total goes down by 5 per cent or so, that's a lot of cargo that isn't moving.
"We will find out at Christmas whether there are enough PlayStations in the shops or not."
About 4,800 kilometres northeast of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.
As the shipping industry teeters on the brink of collapse, the activity at boatyards such as Ulsan and Mokpo in South Korea looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches, have little choice; they are trapped in a cruel time warp.
A decade ago, South Korean president Kim Dae-jung issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. By 2004, his vision had been made real. His country's low-cost yards were winning 40 per cent of world orders. Japan was second, with 24 per cent, and China accounted for 14 per cent.
But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an oil tanker travelling at full speed towards an iceberg.
The labour in Korean shipyards represents the completion of contracts ordered in the fat years of 2006 and 2007. Those ships are doomed to sail out into a global economy that no longer wants them.
Maersk announced last month that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. Maersk's Kristian Morch told the global shipping newspaper Lloyd's List: "It is a perfect storm. You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time a lot of new ships are being delivered."
Demand peaked in 2005, when, with surplus tonnage worldwide standing at just 0.7 per cent, shipowners raced to order, getting in before docks and berths at major shipyards were fully booked. That spell of panic buying has heightened today's mismatch between supply and demand.
Keith Wallis, East Asia editor of Lloyd's List, says: "There was an ordering frenzy on all types of vessel, particularly container ships ... fuelled by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China."
Most orders to be delivered within the next six to nine months will be honoured, Wallis predicts, and the ships will go into service at the expense of older vessels, which will be scrapped or anchored off places such as southern Malaysia.
"Some shipowners won't be able to pay their final instalments when the vessels are completed," says Wallis. "Normally, 50 to 60 per cent is paid on delivery."
South Korean shipyard Hanjin Heavy Industries says it has had to put up for sale three container ships ordered at a cost of US$100 million by Iran's state shipping line after the Iranians said they could not pay the bill.
"The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders," Wallis says. "Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies.
"The problems will start to emerge next year and certainly in 2011, because that's when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build."
Christopher Palsson, a Sweden-based senior consultant at Lloyd's Register-Fairplay Research, says: "Some ships will be sold for demolition but the net balance will put even more pressure on the freight rates and the market itself. A lot of shipowners and operators are going to find themselves in a very difficult situation."
The current downturn is the worst in living memory and more severe even than the slump of the early 1980s, Palsson says.
"Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers ... the lot," he says. "It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in Europe. But then, back in those days the world was a very different place."
Nowhere are those stark economic realities being felt as keenly as in the waters off southern Malaysia. Singapore port chaplain Christian Schmidt says that for the sailors stranded at sea, the pressures are immense.
"There will be a skeleton crew of maybe six to eight people. Some vessels stay that way for one, two or three months. For the crew, it's a tremendous psychological strain. You are stuck with the same small group of people and you have no idea how long it will be for," he says. "It's a very difficult situation. Seafarers tend never to make a big deal out of the hardships they suffer. They say this is what you expect when you go to sea. But in their current situation, many of them cannot keep in touch with their families and relatives. It is as if they are chained up in a prison."
On the shore, the strain is showing as well. "We just want them to go away," says retired fisherman Ha Heng, 62. "They are destroying our livelihood. Fishermen can't cast their nets because there are so many ships and the oil that washes up on the beaches is killing the fish. We've had enough.
"One day, we would like to be able to look out and see the horizon again." - South China Morning Post
Written by South China Morning Post
Monday, 05 October 2009 12:25
HONG KONG: In the soupy green tropical waters that lap the jungle shores of southern Malaysia, a lone Indian officer in a peaked cap glares anxiously down from the 280-metre-long deck of a towering container ship anchored alongside countless other idle vessel.
As our ramshackle wooden fishing boat bobs up and down on the waves, perilously close to the ship, he shoos us away and then, spotting the photographer, scurries back into the echoing vastness of the vessel he has been left to look after almost by himself.
Navigating a precarious course around the hull of the Panama-registered ship, we reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ships sit high in the water.
Nearby, as we meander in searing midday heat and dripping humidity between the hulls of silent ships, a young European officer peers curiously at us from the bridge of an oil tanker owned by Maersk, the world's biggest container shipping line. We ask to go on board, but are waved away by two Indian crewmen. "No one is supposed to be here and they are very frightened of pirates," explains our captain.
Here, on a sleepy stretch of shoreline, we have tracked down what might count as the biggest and most secretive gathering of ships in maritime history. Over the past year, as the global economic crisis has deepened, hundreds of container ships, bulk carriers and oil tankers have congregated, drawing an iron curtain along more than 30 kilometres of Johor state coastline.
With its palm-fringed sandy beaches and lush hinterland, this could be an enticing destination for tourists. Instead, a forbidding armada of steel has sailed quietly in from around the world to transform it into a last resort for the global shipping industry.
Offshore from the bamboo huts and fishing villages, between 300 and 500 vessels, equivalent to the United States and British navies combined, have gathered. It's a remarkable sight and one that shipowners and government economists would prefer you not to see. This vast "ghost fleet" - which, in better times, would have been steaming fully laden between China, Europe and the US to stock shops ahead of Christmas - is symbolic of the depths of the sickness still ravaging the world's economies.
"We know the ships are anchored out there somewhere but we aren't sure exactly where," an officer from one of the sailors' unions in Singapore told us. "People have flown over the area and talked of seeing a massive number of ships off the coast of Malaysia, so that's probably the place to look." And it is.
With the waters of Singapore already teeming with ships paying hefty anchorage fees, idle vessels are instead being anchored in shallow international waters between the southern coast of Malaysia and the Indonesian island of Batam.
Fisherman Ah Wat, 42, who lives in Sungai Rengit, Johor, says: "Before, there was nothing out there - just sea. Then the big ships suddenly came one day, and every day there are more of them. Some of them stay for a few weeks and then go away. But most of them just stay. You used to look from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon."
The size of the idle fleet is so great you can only begin to guess at its number when the ships' lights are switched on after sunset. Seen from the shore, a blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts is a surreal and disorienting experience, making you feel as if you are adrift on a dark sea staring at an illuminated city.
"We don't understand why they are here," says Ah Wat. "There are so many ships - there must be nearly 500 out there - but no one seems to be on board. When we sail past them in our fishing boats, we never see anyone.
"They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships."
Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong, says: "A couple of years ago, those ships would have been steaming back and forth, going at full speed, but now you have got something like 12 per cent of the world's container ships currently doing nothing."
Shipowners choose to anchor vessels in waters close to Singapore because it is well positioned for key global trade routes when the economy revives, Huxley says. It is also seen as a safe haven because of the region's benign climate and relatively low typhoon count.
Business for bulk carriers has picked up slightly in recent months, largely because of the mainland's revived appetite for raw materials such as iron ore, says Huxley, but this is a small part of international business, and the prospects for the container trade remain bleak. Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in what Maersk calls a "crisis of historic dimensions". Last month, the company reported its first half-year loss since it was founded, 105 years ago.
Martin Stopford, managing director of Clarksons, London's biggest ship broker, says: "In 2006 and 2007, [container] trade was growing at 11 per cent. In 2008, it slowed down by 4.7 per cent. This year we think it might go down by as much as 8 per cent. Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere."
Trade is slowing because retailers in the West are running on very low stock levels, not only because they expect consumer spending to be down, even ahead of Christmas, but also because their levels of credit have shrunk, so they are unable to keep large stockpiles.
Stopford explains: "Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tonnes of cargo a year. That's more than one tonne per person and probably two to three tonnes for richer people like us in the West. If the total goes down by 5 per cent or so, that's a lot of cargo that isn't moving.
"We will find out at Christmas whether there are enough PlayStations in the shops or not."
About 4,800 kilometres northeast of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.
As the shipping industry teeters on the brink of collapse, the activity at boatyards such as Ulsan and Mokpo in South Korea looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches, have little choice; they are trapped in a cruel time warp.
A decade ago, South Korean president Kim Dae-jung issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. By 2004, his vision had been made real. His country's low-cost yards were winning 40 per cent of world orders. Japan was second, with 24 per cent, and China accounted for 14 per cent.
But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an oil tanker travelling at full speed towards an iceberg.
The labour in Korean shipyards represents the completion of contracts ordered in the fat years of 2006 and 2007. Those ships are doomed to sail out into a global economy that no longer wants them.
Maersk announced last month that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. Maersk's Kristian Morch told the global shipping newspaper Lloyd's List: "It is a perfect storm. You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time a lot of new ships are being delivered."
Demand peaked in 2005, when, with surplus tonnage worldwide standing at just 0.7 per cent, shipowners raced to order, getting in before docks and berths at major shipyards were fully booked. That spell of panic buying has heightened today's mismatch between supply and demand.
Keith Wallis, East Asia editor of Lloyd's List, says: "There was an ordering frenzy on all types of vessel, particularly container ships ... fuelled by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China."
Most orders to be delivered within the next six to nine months will be honoured, Wallis predicts, and the ships will go into service at the expense of older vessels, which will be scrapped or anchored off places such as southern Malaysia.
"Some shipowners won't be able to pay their final instalments when the vessels are completed," says Wallis. "Normally, 50 to 60 per cent is paid on delivery."
South Korean shipyard Hanjin Heavy Industries says it has had to put up for sale three container ships ordered at a cost of US$100 million by Iran's state shipping line after the Iranians said they could not pay the bill.
"The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders," Wallis says. "Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies.
"The problems will start to emerge next year and certainly in 2011, because that's when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build."
Christopher Palsson, a Sweden-based senior consultant at Lloyd's Register-Fairplay Research, says: "Some ships will be sold for demolition but the net balance will put even more pressure on the freight rates and the market itself. A lot of shipowners and operators are going to find themselves in a very difficult situation."
The current downturn is the worst in living memory and more severe even than the slump of the early 1980s, Palsson says.
"Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers ... the lot," he says. "It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in Europe. But then, back in those days the world was a very different place."
Nowhere are those stark economic realities being felt as keenly as in the waters off southern Malaysia. Singapore port chaplain Christian Schmidt says that for the sailors stranded at sea, the pressures are immense.
"There will be a skeleton crew of maybe six to eight people. Some vessels stay that way for one, two or three months. For the crew, it's a tremendous psychological strain. You are stuck with the same small group of people and you have no idea how long it will be for," he says. "It's a very difficult situation. Seafarers tend never to make a big deal out of the hardships they suffer. They say this is what you expect when you go to sea. But in their current situation, many of them cannot keep in touch with their families and relatives. It is as if they are chained up in a prison."
On the shore, the strain is showing as well. "We just want them to go away," says retired fisherman Ha Heng, 62. "They are destroying our livelihood. Fishermen can't cast their nets because there are so many ships and the oil that washes up on the beaches is killing the fish. We've had enough.
"One day, we would like to be able to look out and see the horizon again." - South China Morning Post
Oil & gas sector ripe for upward re-rating
Oil & gas sector ripe for upward re-rating
Tags: Alam Maritim Resources Bhd | Barrow Island | Chevron Corp | enhanced oil recovery | EOR | Exxon Mobil Corp | Gorgon project | Handal Resources Bhd | Jason Yap | Kencana Petroleum Bhd | liquefied natural gas | LNG | O&G | oil and gas sector | OSK Research Sdn Bhd | Petra Group | Petroliam Nasional Bhd | Petronas | Royal Dutch Shell plc | Tanjung Offshore Bhd | Wah Seong Corp Bhd
Written by Chong Jin Hun
Tuesday, 06 October 2009 22:46
KUALA LUMPUR: The Malaysian oil and gas (O&G) sector could be ripe for an upward re-rating in anticipation of support services firms being awarded new contracts by oil majors as demand for crude oil recovers amid an improving global economic landscape.
Valuations for O&G support services firms are deemed attractive at current prices, according to OSK Research Sdn Bhd analyst Jason Yap. He noted that average sector valuations are trading below a price-to-earnings ratio (PER) of 10 times financial year 2010 earnings, compared with a historical PER of between 18 and 20 times.
"Once the tap is turned on and contracts start to flow, the future earnings of local supporting O&G companies would be upgraded and a fundamental upward re-rating on the sector would follow.
"There has been no major O&G contract award in the past one year and we believe these are due anytime now," Yap wrote in a note to clients yesterday.
Yap, who likes O&G firms like ALAM MARITIM RESOURCES BHD [], KENCANA PETROLEUM BHD [] and Wah Seong Corp Bhd, is retaining his outperform call on the sector.
The industry is deemed fairly valued at a higher PER of 11 times, an upgrade from the nine times estimated earlier. The upward revision is in anticipation of new jobs in the pipeline.
O&G support services include fabrication of O&G facilities, pipe coating, installation of pipeline and facilities, engineering, procurement and CONSTRUCTION [] and provision of offshore supply vessels (OSV).
Several global large-scale projects involving local companies are worth noting. These include Australia's Gorgon liquefied natural gas (LNG) project, which includes the construction of an LNG facility with an annual capacity of some 15 million tonnes on Barrow Island, off Western Australia.
The Gorgon LNG initiative, one of the world's largest, is a collaboration among three oil majors — Chevron Corp, Exxon Mobil Corp and Royal Dutch Shell plc. Based on news reports, the initial phase of the project is valued at some A$43 billion (RM132.69 billion).
Malaysian entities including process equipment maker KNM GROUP BHD [] and pipe-coating specialist Wah Seong are among bidders for the job, Yap said, quoting sources.
In Malaysia, Exxon Mobil and Petroliam Nasional Bhd (Petronas) had signed a production-sharing contract to develop seven existing oil fields off the peninsula. These include the Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tabu and Palas fields, which are mostly off the coast of Terengganu.
Both parties had agreed to spend at least US$2.1 billion (RM7.22 billion) on major enhanced oil recovery (EOR) operations, rejuvenation of facilities and further development and drilling activities in the fields.
OSK said potential beneficiaries of the project included OSV players like Alam Maritim, Petra Group and TANJUNG OFFSHORE BHD [], besides crane manufacturer Handal Resources Bhd.
Oil sands projects, which involve companies like KNM, are an area to watch as oil prices gained momentum.
"With oil prices building a new base at US$70 a barrel, we believe it would be a matter of time before oil sands projects, which were previously abandoned owing to unfavourable oil price, are revived," said Yap.
Crude oil prices have more than doubled to US$70 a barrel from about US$30 a barrel early this year. The commodity almost touched US$150 a barrel in the middle of last year. OSK estimated that the commodity would be transacted at between US$70 and US$80 a barrel next year.
"We believe crude oil prices should go up in 2010 in line with a better global economic outlook and spur the award of new O&G projects," Yap said.
While a rise in crude oil prices was often associated with the weakness of the US dollar, Yap said the major driver of crude prices was an anticipation of a recovery in the global economy and higher demand for the hydrocarbon resource.
"Also, there is a very real possibility of a scarcity of oil supply starting from the next few years since most of the oil majors have been holding back the bulk of their capex on new O&G projects in the past one year," Yap said.
Tags: Alam Maritim Resources Bhd | Barrow Island | Chevron Corp | enhanced oil recovery | EOR | Exxon Mobil Corp | Gorgon project | Handal Resources Bhd | Jason Yap | Kencana Petroleum Bhd | liquefied natural gas | LNG | O&G | oil and gas sector | OSK Research Sdn Bhd | Petra Group | Petroliam Nasional Bhd | Petronas | Royal Dutch Shell plc | Tanjung Offshore Bhd | Wah Seong Corp Bhd
Written by Chong Jin Hun
Tuesday, 06 October 2009 22:46
KUALA LUMPUR: The Malaysian oil and gas (O&G) sector could be ripe for an upward re-rating in anticipation of support services firms being awarded new contracts by oil majors as demand for crude oil recovers amid an improving global economic landscape.
Valuations for O&G support services firms are deemed attractive at current prices, according to OSK Research Sdn Bhd analyst Jason Yap. He noted that average sector valuations are trading below a price-to-earnings ratio (PER) of 10 times financial year 2010 earnings, compared with a historical PER of between 18 and 20 times.
"Once the tap is turned on and contracts start to flow, the future earnings of local supporting O&G companies would be upgraded and a fundamental upward re-rating on the sector would follow.
"There has been no major O&G contract award in the past one year and we believe these are due anytime now," Yap wrote in a note to clients yesterday.
Yap, who likes O&G firms like ALAM MARITIM RESOURCES BHD [], KENCANA PETROLEUM BHD [] and Wah Seong Corp Bhd, is retaining his outperform call on the sector.
The industry is deemed fairly valued at a higher PER of 11 times, an upgrade from the nine times estimated earlier. The upward revision is in anticipation of new jobs in the pipeline.
O&G support services include fabrication of O&G facilities, pipe coating, installation of pipeline and facilities, engineering, procurement and CONSTRUCTION [] and provision of offshore supply vessels (OSV).
Several global large-scale projects involving local companies are worth noting. These include Australia's Gorgon liquefied natural gas (LNG) project, which includes the construction of an LNG facility with an annual capacity of some 15 million tonnes on Barrow Island, off Western Australia.
The Gorgon LNG initiative, one of the world's largest, is a collaboration among three oil majors — Chevron Corp, Exxon Mobil Corp and Royal Dutch Shell plc. Based on news reports, the initial phase of the project is valued at some A$43 billion (RM132.69 billion).
Malaysian entities including process equipment maker KNM GROUP BHD [] and pipe-coating specialist Wah Seong are among bidders for the job, Yap said, quoting sources.
In Malaysia, Exxon Mobil and Petroliam Nasional Bhd (Petronas) had signed a production-sharing contract to develop seven existing oil fields off the peninsula. These include the Seligi, Guntong, Tapis, Semangkok, Irong Barat, Tabu and Palas fields, which are mostly off the coast of Terengganu.
Both parties had agreed to spend at least US$2.1 billion (RM7.22 billion) on major enhanced oil recovery (EOR) operations, rejuvenation of facilities and further development and drilling activities in the fields.
OSK said potential beneficiaries of the project included OSV players like Alam Maritim, Petra Group and TANJUNG OFFSHORE BHD [], besides crane manufacturer Handal Resources Bhd.
Oil sands projects, which involve companies like KNM, are an area to watch as oil prices gained momentum.
"With oil prices building a new base at US$70 a barrel, we believe it would be a matter of time before oil sands projects, which were previously abandoned owing to unfavourable oil price, are revived," said Yap.
Crude oil prices have more than doubled to US$70 a barrel from about US$30 a barrel early this year. The commodity almost touched US$150 a barrel in the middle of last year. OSK estimated that the commodity would be transacted at between US$70 and US$80 a barrel next year.
"We believe crude oil prices should go up in 2010 in line with a better global economic outlook and spur the award of new O&G projects," Yap said.
While a rise in crude oil prices was often associated with the weakness of the US dollar, Yap said the major driver of crude prices was an anticipation of a recovery in the global economy and higher demand for the hydrocarbon resource.
"Also, there is a very real possibility of a scarcity of oil supply starting from the next few years since most of the oil majors have been holding back the bulk of their capex on new O&G projects in the past one year," Yap said.
A boon for 3A in Wilmar
A boon for 3A in Wilmar
Tags: Fang Chew Ham | Three-A-Resources Bhd (3A) | Wilmar Intenational Ltd
Written by Cindy Yeap
Tuesday, 06 October 2009 10:46
KUALA LUMPUR: In a surprise move seen as further diversifying downstream, global PLANTATION [] player Wilmar International Ltd is set to emerge as the second-largest shareholder in food and beverage ingredients manufacturer THREE-A RESOURCES BHD [] (3A).
The exercise is the first step towards more partnerships ahead, including for potential joint overseas acquisitions, 3A, a nondescript Main Market company said in a statement to Bursa Malaysia yesterday.
Wilmar, a Singapore-listed plantation and palm oil processor, is set to pay RM46.2 million or 75 sen per share for a 16.67% stake in 3A’s enlarged share capital via a proposed private placement of up to 61.6 million shares, or 20% of its existing share base, 3A said.
“Wilmar has given a letter stating that it is interested to subscribe for 61.6 million placement shares at 75 sen per share… The proposed private placement is to enable 3A Resources and Wilmar to collectively venture into any future overseas investment,” 3A said in the statement.
The Malaysian company produces, among others, caramel colour, glucose syrup and soya protein sauce that are used in the processing of food. Its maltodextrin plant is the only one in the country and plans are underway to set up an additional plant by the end of next year, according to a note dated Aug 14 by Asia Analytica Sdn Bhd.
Maltodextrin is a white powder with little sweetness that is widely used as fillers or bulking agent.
After the completion of the placement, Wilmar, which recently delayed the listing of its Hong Kong unit, will end up as the second-largest shareholder in 3A.
The 75-sen indicative issue price represents a 12.63% discount to 3A’s five-day weighted average market price up to Oct 2 of 85.84 sen. The indicative issue price is at a 21.9% discount to 3A’s 96 sen closing price yesterday. The stock, which rose to as high as 97.5 sen intra-day yesterday, ended the day up 13.5 sen, or 16.36%, with 12.7 million shares done.
Standard & Poor’s has a hold recommendation on 3A with a 60 sen price target as at Aug 14, according to Bloomberg data.
The RM46.2 million proceeds from the private placement will be used as working capital as well as for “new overseas investment” after deducting some RM400,000 in estimated expenses, 3A said, without elaborating on the possible acquisitions abroad.
The indicative proceeds are set to boost 3A’s net asset per share to 34 sen from 26 sen as at Dec 31, 2009. The enlarged share base of 369.6 million shares (from 308 million shares currently) will also see its gearing fall to 0.36 times from 0.57 times.
The proposed private placement, which needs the approval of shareholders of the Malaysian company, is expected to be completed in the fourth quarter of 2009 and is not expected to have a material effect on earnings for the current year ending Dec 31, 2009, 3A said.
While 3A’s earnings per share (EPS) may see a corresponding reduction with the 20% larger share base, the company expects proceeds from the private placement to be used for overseas investments which are expected to contribute positively to future earnings.
Fang Chew Ham and family, currently 3A’s single largest shareholder, will see their collective shareholding diluted to 37.2% from 44.6% following the private placement. Lembaga Tabung Haji will become 3A’s third-largest shareholder with a 4.6% stake, down from 5.5% as at Sept 30, 2009.
3A has appointed OSK Investment Bank as adviser for the proposed private placement, and applications for the exercise will be submitted to the authorities within a month.
Wilmar, whose shareholders include the Kuok Group, fell six cents, or 0.98%, to S$6.05 with 6.8 million shares done yesterday. It had not made an announcement to the Singapore exchange at press time.
This article appeared in The Edge Financial Daily, October 6, 2009.
Tags: Fang Chew Ham | Three-A-Resources Bhd (3A) | Wilmar Intenational Ltd
Written by Cindy Yeap
Tuesday, 06 October 2009 10:46
KUALA LUMPUR: In a surprise move seen as further diversifying downstream, global PLANTATION [] player Wilmar International Ltd is set to emerge as the second-largest shareholder in food and beverage ingredients manufacturer THREE-A RESOURCES BHD [] (3A).
The exercise is the first step towards more partnerships ahead, including for potential joint overseas acquisitions, 3A, a nondescript Main Market company said in a statement to Bursa Malaysia yesterday.
Wilmar, a Singapore-listed plantation and palm oil processor, is set to pay RM46.2 million or 75 sen per share for a 16.67% stake in 3A’s enlarged share capital via a proposed private placement of up to 61.6 million shares, or 20% of its existing share base, 3A said.
“Wilmar has given a letter stating that it is interested to subscribe for 61.6 million placement shares at 75 sen per share… The proposed private placement is to enable 3A Resources and Wilmar to collectively venture into any future overseas investment,” 3A said in the statement.
The Malaysian company produces, among others, caramel colour, glucose syrup and soya protein sauce that are used in the processing of food. Its maltodextrin plant is the only one in the country and plans are underway to set up an additional plant by the end of next year, according to a note dated Aug 14 by Asia Analytica Sdn Bhd.
Maltodextrin is a white powder with little sweetness that is widely used as fillers or bulking agent.
After the completion of the placement, Wilmar, which recently delayed the listing of its Hong Kong unit, will end up as the second-largest shareholder in 3A.
The 75-sen indicative issue price represents a 12.63% discount to 3A’s five-day weighted average market price up to Oct 2 of 85.84 sen. The indicative issue price is at a 21.9% discount to 3A’s 96 sen closing price yesterday. The stock, which rose to as high as 97.5 sen intra-day yesterday, ended the day up 13.5 sen, or 16.36%, with 12.7 million shares done.
Standard & Poor’s has a hold recommendation on 3A with a 60 sen price target as at Aug 14, according to Bloomberg data.
The RM46.2 million proceeds from the private placement will be used as working capital as well as for “new overseas investment” after deducting some RM400,000 in estimated expenses, 3A said, without elaborating on the possible acquisitions abroad.
The indicative proceeds are set to boost 3A’s net asset per share to 34 sen from 26 sen as at Dec 31, 2009. The enlarged share base of 369.6 million shares (from 308 million shares currently) will also see its gearing fall to 0.36 times from 0.57 times.
The proposed private placement, which needs the approval of shareholders of the Malaysian company, is expected to be completed in the fourth quarter of 2009 and is not expected to have a material effect on earnings for the current year ending Dec 31, 2009, 3A said.
While 3A’s earnings per share (EPS) may see a corresponding reduction with the 20% larger share base, the company expects proceeds from the private placement to be used for overseas investments which are expected to contribute positively to future earnings.
Fang Chew Ham and family, currently 3A’s single largest shareholder, will see their collective shareholding diluted to 37.2% from 44.6% following the private placement. Lembaga Tabung Haji will become 3A’s third-largest shareholder with a 4.6% stake, down from 5.5% as at Sept 30, 2009.
3A has appointed OSK Investment Bank as adviser for the proposed private placement, and applications for the exercise will be submitted to the authorities within a month.
Wilmar, whose shareholders include the Kuok Group, fell six cents, or 0.98%, to S$6.05 with 6.8 million shares done yesterday. It had not made an announcement to the Singapore exchange at press time.
This article appeared in The Edge Financial Daily, October 6, 2009.
Money flowing intotop three banks
Money flowing intotop three banks
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Glovemakers surge on upbeat reports on Top Glove
Glovemakers surge on upbeat reports on Top Glove
Tags: Adventa Bhd | AmResearch Sdn Bhd | Glovemakers | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | Maybank IB | Maybank Investment Bank Bhd | Supermax Corporation Bhd | Top Glove Corporation Bhd
Written by Surin Murugiah
Tuesday, 06 October 2009 23:18
KUALA LUMPUR: Glovemakers advanced today after analysts issued upbeat reports on TOP GLOVE CORPORATION BHD [] ahead of the release of the company's fourth quarter (4Q) results scheduled for Thursday, and on the outlook for the rubber glove sector.
AmResearch Sdn Bhd said that the demand outlook for rubber gloves remained intact at a healthy 8% to 10% growth per annum, adding that the (A)H1N1-related buying was estimated to have spurred global demand by an additional 14 billion to 15 billion pieces, on top of the 11 billion to 17 billion pieces from organic growth.
Top Glove surged to its highest level since Aug 2, 2007, today, jumping 5.5% or 41 sen to RM7.87, after Maybank Investment Bank Bhd (Maybank IB) and AmResearch both maintained their buy calls on the stock at RM7.46, with the former saying the company's 4Q09 results were expected to beat street estimates.
KOSSAN RUBBER INDUSTRIES BHD [] gained 3.22% or 14 sen to RM4.49, its highest close since Sept 28, 2007.
Meanwhile, LATEXX PARTNERS BHD [] jumped 7.14% or 15 sen to RM2.25; SUPERMAX CORPORATION BHD [] up 3.85% or 10 sen to RM2.70; ADVENTA BHD [] up 3.70% or 6 sen to RM1.68 while HARTALEGA HOLDINGS BHD [] added 2.52% or 13 sen to RM5.29.
Maybank IB said Top Glove's 4Q09 results should meet the research house's expectations, but above consensus while dividends may surprise.
"We continue to like Top Glove's commanding market leadership in the sector, earnings growth potential and solid balance sheet," said Maybank IB, which maintained its target price for the stock at RM8.30.
The research house said Top Glove's 4Q net profit could reach RM55 million to RM56 million, which would bring its full-year net profit to RM166 million to RM167 million, in line with its own but above street estimates of RM154 million.
"Growth drivers would come from the surge in orders (+10%-20% quarter-on-quarter) and expansion in earnings before interest and tax (Ebit) margins (+3%-4% q-o-q), capitalising on the (A)H1N1 flu outbreak whilst making headway into the Latin America market (Brazil and Argentina).
"Furthermore, a lower interest expense following the retirement of RM70 million in debt and cost savings from lower input costs were not fully passed on to customers. Latex cost, 52% of its operational expenditure, fell 14% q-o-q to RM3.80 per kg in June-August," it said.
The research house also said Top Glove's net cash position was believed to have grown for the fourth consecutive quarter, improving by about 40% q-o-q.
"With a higher cash pile, Top Glove may surprise with a higher dividend payout (FY08: 30%).
"Assuming a 40% payout (22 sen dividend per share), this will entail a dividend of 15 sen per share (+150% year-on-year) in 4Q. Top Glove had paid a 7 sen interim dividend year-to-date," it said.
Meanwhile, AmResearch raised its fair value for Top Glove to RM8.45 from RM8.30, and said it had raised its FY09-11 earnings forecast for the company by 2% to 8%.
It said the growth would be underpinned by slightly higher revenue growth from prospects of higher recurring orders coming mainly from sales of basic powdered gloves to Latin American countries, and better-than-expected sustainable margin going forward due to higher average selling prices and lower overall cost structures. "As such, we have increased our FY10F and FY11F dividend forecasts to 18 and 19 sen per share, respectively, premised on a 30% dividend payout.
"We are however, keeping our forecast of 15 sen per share for FY09F, but would not be surprised if management were to choose to reward shareholders. The group is in a strong net cash position with cash holdings of RM173 million as at 9MFY09," it said.
AmResearch said that Top Glove's expansion to boost installed capacity by about 10% to 34.5 billion pieces of gloves per annum from an additional 32 production lines by end-FY10F was on schedule.
It said the company's Factory 20 was set for completion by February 2010 and Factory 21 by July 2010.
"Though the stock has outperformed the FBM KLCI by 51% on a relative basis year-to-date, valuation is still undemanding as it is still valued below its historical 9-year average of 15 times.
"We reiterate our buy on the group's proven earnings deliverance backed by solid fundamentals, market share dominance in the industry, as well as better trading liquidity," it said, adding that the fair value of RM8.45 offered 18% upside potential.
Tags: Adventa Bhd | AmResearch Sdn Bhd | Glovemakers | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | Maybank IB | Maybank Investment Bank Bhd | Supermax Corporation Bhd | Top Glove Corporation Bhd
Written by Surin Murugiah
Tuesday, 06 October 2009 23:18
KUALA LUMPUR: Glovemakers advanced today after analysts issued upbeat reports on TOP GLOVE CORPORATION BHD [] ahead of the release of the company's fourth quarter (4Q) results scheduled for Thursday, and on the outlook for the rubber glove sector.
AmResearch Sdn Bhd said that the demand outlook for rubber gloves remained intact at a healthy 8% to 10% growth per annum, adding that the (A)H1N1-related buying was estimated to have spurred global demand by an additional 14 billion to 15 billion pieces, on top of the 11 billion to 17 billion pieces from organic growth.
Top Glove surged to its highest level since Aug 2, 2007, today, jumping 5.5% or 41 sen to RM7.87, after Maybank Investment Bank Bhd (Maybank IB) and AmResearch both maintained their buy calls on the stock at RM7.46, with the former saying the company's 4Q09 results were expected to beat street estimates.
KOSSAN RUBBER INDUSTRIES BHD [] gained 3.22% or 14 sen to RM4.49, its highest close since Sept 28, 2007.
Meanwhile, LATEXX PARTNERS BHD [] jumped 7.14% or 15 sen to RM2.25; SUPERMAX CORPORATION BHD [] up 3.85% or 10 sen to RM2.70; ADVENTA BHD [] up 3.70% or 6 sen to RM1.68 while HARTALEGA HOLDINGS BHD [] added 2.52% or 13 sen to RM5.29.
Maybank IB said Top Glove's 4Q09 results should meet the research house's expectations, but above consensus while dividends may surprise.
"We continue to like Top Glove's commanding market leadership in the sector, earnings growth potential and solid balance sheet," said Maybank IB, which maintained its target price for the stock at RM8.30.
The research house said Top Glove's 4Q net profit could reach RM55 million to RM56 million, which would bring its full-year net profit to RM166 million to RM167 million, in line with its own but above street estimates of RM154 million.
"Growth drivers would come from the surge in orders (+10%-20% quarter-on-quarter) and expansion in earnings before interest and tax (Ebit) margins (+3%-4% q-o-q), capitalising on the (A)H1N1 flu outbreak whilst making headway into the Latin America market (Brazil and Argentina).
"Furthermore, a lower interest expense following the retirement of RM70 million in debt and cost savings from lower input costs were not fully passed on to customers. Latex cost, 52% of its operational expenditure, fell 14% q-o-q to RM3.80 per kg in June-August," it said.
The research house also said Top Glove's net cash position was believed to have grown for the fourth consecutive quarter, improving by about 40% q-o-q.
"With a higher cash pile, Top Glove may surprise with a higher dividend payout (FY08: 30%).
"Assuming a 40% payout (22 sen dividend per share), this will entail a dividend of 15 sen per share (+150% year-on-year) in 4Q. Top Glove had paid a 7 sen interim dividend year-to-date," it said.
Meanwhile, AmResearch raised its fair value for Top Glove to RM8.45 from RM8.30, and said it had raised its FY09-11 earnings forecast for the company by 2% to 8%.
It said the growth would be underpinned by slightly higher revenue growth from prospects of higher recurring orders coming mainly from sales of basic powdered gloves to Latin American countries, and better-than-expected sustainable margin going forward due to higher average selling prices and lower overall cost structures. "As such, we have increased our FY10F and FY11F dividend forecasts to 18 and 19 sen per share, respectively, premised on a 30% dividend payout.
"We are however, keeping our forecast of 15 sen per share for FY09F, but would not be surprised if management were to choose to reward shareholders. The group is in a strong net cash position with cash holdings of RM173 million as at 9MFY09," it said.
AmResearch said that Top Glove's expansion to boost installed capacity by about 10% to 34.5 billion pieces of gloves per annum from an additional 32 production lines by end-FY10F was on schedule.
It said the company's Factory 20 was set for completion by February 2010 and Factory 21 by July 2010.
"Though the stock has outperformed the FBM KLCI by 51% on a relative basis year-to-date, valuation is still undemanding as it is still valued below its historical 9-year average of 15 times.
"We reiterate our buy on the group's proven earnings deliverance backed by solid fundamentals, market share dominance in the industry, as well as better trading liquidity," it said, adding that the fair value of RM8.45 offered 18% upside potential.
RHB Research: Maybank’s ROE still sub-par
RHB Research: Maybank’s ROE still sub-par
Tags: BII | Brokers Call | MCB Bank | Myabank | RHB Research
Written by Financial Daily
Wednesday, 07 October 2009 10:20
RHB Research noted that post MALAYAN BANKING BHD []’s (Maybank) FY09 results, the uncertainties surrounding the impairment on Bank Internasional Indonesia (BII) and MCB Bank of Pakistan would be eliminated.
“However, the aftermath (interest expense from hybrid and sub debt raised as well as dilution from the rights issue) from the expensive acquisitions means that its return on equity (ROE) will be sub-par over the next two to three years,” it said.
“Although BII’s prospects are promising (given a high-margin, low-penetration rate market environment in Indonesia), the group as a whole would need to integrate and ensure strong risk management and processes before embarking to realise the potential of BII. This would take two to three years before it returns to pre-acquisition ROE of 15% to 16%,” it added.
RHB Research maintained its underperform call on Maybank, pegging the stock’s fair value at RM5.97.
It added that earnings growth for the largest bank in the country seem to be intact.
“This is on the back of strong growth during the first two months of FY06/2010 (as transformation is slowly bearing fruits), high single-digit loan growth for the group (with the star being BII) and no kitchen sinking at BII (as full integration of provisioning policy has limited impact on P&L) to derail the expansion trajectory,” it noted.
RHB Research also said that BII is the focus for the future growth of Maybank.
“This is to capitalise on an underserved market with high margin. Besides transformation and expansion in BII, WOM Finance (providing motorcycle financing) will be another focal point. However, due to the latter’s track record, we are cautious about management’s optimism.”
RHB Research maintained its conservative projection of Maybank’s ROE for FY2010 to be at 10.2%, adding that it assumed the bank’s dividend payout to be 60% for FY2010 to FY2012.
Maybank gained six sen to close at RM6.71 yesterday.
This article appeared in The Edge Financial Daily, October 7, 2009.
Tags: BII | Brokers Call | MCB Bank | Myabank | RHB Research
Written by Financial Daily
Wednesday, 07 October 2009 10:20
RHB Research noted that post MALAYAN BANKING BHD []’s (Maybank) FY09 results, the uncertainties surrounding the impairment on Bank Internasional Indonesia (BII) and MCB Bank of Pakistan would be eliminated.
“However, the aftermath (interest expense from hybrid and sub debt raised as well as dilution from the rights issue) from the expensive acquisitions means that its return on equity (ROE) will be sub-par over the next two to three years,” it said.
“Although BII’s prospects are promising (given a high-margin, low-penetration rate market environment in Indonesia), the group as a whole would need to integrate and ensure strong risk management and processes before embarking to realise the potential of BII. This would take two to three years before it returns to pre-acquisition ROE of 15% to 16%,” it added.
RHB Research maintained its underperform call on Maybank, pegging the stock’s fair value at RM5.97.
It added that earnings growth for the largest bank in the country seem to be intact.
“This is on the back of strong growth during the first two months of FY06/2010 (as transformation is slowly bearing fruits), high single-digit loan growth for the group (with the star being BII) and no kitchen sinking at BII (as full integration of provisioning policy has limited impact on P&L) to derail the expansion trajectory,” it noted.
RHB Research also said that BII is the focus for the future growth of Maybank.
“This is to capitalise on an underserved market with high margin. Besides transformation and expansion in BII, WOM Finance (providing motorcycle financing) will be another focal point. However, due to the latter’s track record, we are cautious about management’s optimism.”
RHB Research maintained its conservative projection of Maybank’s ROE for FY2010 to be at 10.2%, adding that it assumed the bank’s dividend payout to be 60% for FY2010 to FY2012.
Maybank gained six sen to close at RM6.71 yesterday.
This article appeared in The Edge Financial Daily, October 7, 2009.
Kuok Khoon Ho quits Transmile board
Kuok Khoon Ho quits Transmile board
Tags: Kuok Brothers Sdn Bhd | Kuok Khoon Ho | resignation | Transmile Group Bhd
Written by Financial Daily
Wednesday, 07 October 2009 10:36
KUALA LUMPUR: Beleaguered TRANSMILE GROUP BHD [] saw the resignation of non-independent and non-executive director Kuok Khoon Ho.
The air transportation company said Kuok’s resignation took effect yesterday. He had been with the board since April 2004.
Kuok, 59, is the chairman of Kuok Brothers Sdn Bhd, which holds a 17.99% stake in Transmile or 48.6 million shares. Kuok himself holds 50,000 shares.
Transmile has borrowings of up to RM575.29 million as of June 30, 2009. It posted net loss of RM449,000 on the back of RM38.53 million in revenue in the second quarter ended June 30.
The company, which was a darling of foreign investors, was once trading at a high of RM13 in May 2007. But since then, its share price has plunged after the uncovering of massive financial irregularities. The stock closed unchanged at RM1.16 yesterday.
The Securities Commission had in July preferred criminal charges against Transmile’s former chief executive officer Gan Boon Aun, former chief financial officer Lo Chok Ping and executive director Khiudin Mohd under the Securities Industry Act 1983.
The charges were for abetting Transmile in making a statement that was misleading, in particular relating to revenue in the unaudited consolidated results for the financial year ended Dec 31, 2006. The misleading statement was in relation to its reported revenue of RM338.47 million.
However, in May last year, the SC withdrew the charge against Lo after he paid a compound of RM700,000.
This article appeared in The Edge Financial Daily, October 7, 2009.
Tags: Kuok Brothers Sdn Bhd | Kuok Khoon Ho | resignation | Transmile Group Bhd
Written by Financial Daily
Wednesday, 07 October 2009 10:36
KUALA LUMPUR: Beleaguered TRANSMILE GROUP BHD [] saw the resignation of non-independent and non-executive director Kuok Khoon Ho.
The air transportation company said Kuok’s resignation took effect yesterday. He had been with the board since April 2004.
Kuok, 59, is the chairman of Kuok Brothers Sdn Bhd, which holds a 17.99% stake in Transmile or 48.6 million shares. Kuok himself holds 50,000 shares.
Transmile has borrowings of up to RM575.29 million as of June 30, 2009. It posted net loss of RM449,000 on the back of RM38.53 million in revenue in the second quarter ended June 30.
The company, which was a darling of foreign investors, was once trading at a high of RM13 in May 2007. But since then, its share price has plunged after the uncovering of massive financial irregularities. The stock closed unchanged at RM1.16 yesterday.
The Securities Commission had in July preferred criminal charges against Transmile’s former chief executive officer Gan Boon Aun, former chief financial officer Lo Chok Ping and executive director Khiudin Mohd under the Securities Industry Act 1983.
The charges were for abetting Transmile in making a statement that was misleading, in particular relating to revenue in the unaudited consolidated results for the financial year ended Dec 31, 2006. The misleading statement was in relation to its reported revenue of RM338.47 million.
However, in May last year, the SC withdrew the charge against Lo after he paid a compound of RM700,000.
This article appeared in The Edge Financial Daily, October 7, 2009.
Dialog proposes 1 treasury share for 50 held
Dialog proposes 1 treasury share for 50 held
Tags: Dialog | divbidend | treasury share
Written by Joseph Chin
Wednesday, 07 October 2009 18:32
KUALA LUMPUR: DIALOG GROUP BHD [] has declared a proposed special share dividend of one treasury share for every 50 shares held, amounting to 27.71 million treasury shares, to be distributed for the financial year ended June 30, 2009.
Dialog said on Wednesday, Oct 7 the proposed special share dividend is to commemorate the 25-year anniversary of incorporation of Dialog group of companies. The entitlement date has yet to be fixed.
"Together with cash dividends (interim and proposed final) of 36% less 25% tax, total gross dividend rate for FY2009 is 57.6%," it said, adding the dividend payout ratio for FY2009 is 74%.
Based on Dialog's five-day volume weighted average share price of RM1.2424 as at Oct 6, the gross dividend yield is 4.6%.
This is the second time the company is distributing share dividend. The first time was when it distributed one treasury share for every 50 shares held for FY ended June 30, 2006 to commemorate its 10-year anniversary of listing on Bursa Malaysia Securities Bhd.
The proposed special share dividend and the proposed final cash dividend of 24% less 25% tax are subject to shareholders’ approvals at the forthcoming AGM.
Tags: Dialog | divbidend | treasury share
Written by Joseph Chin
Wednesday, 07 October 2009 18:32
KUALA LUMPUR: DIALOG GROUP BHD [] has declared a proposed special share dividend of one treasury share for every 50 shares held, amounting to 27.71 million treasury shares, to be distributed for the financial year ended June 30, 2009.
Dialog said on Wednesday, Oct 7 the proposed special share dividend is to commemorate the 25-year anniversary of incorporation of Dialog group of companies. The entitlement date has yet to be fixed.
"Together with cash dividends (interim and proposed final) of 36% less 25% tax, total gross dividend rate for FY2009 is 57.6%," it said, adding the dividend payout ratio for FY2009 is 74%.
Based on Dialog's five-day volume weighted average share price of RM1.2424 as at Oct 6, the gross dividend yield is 4.6%.
This is the second time the company is distributing share dividend. The first time was when it distributed one treasury share for every 50 shares held for FY ended June 30, 2006 to commemorate its 10-year anniversary of listing on Bursa Malaysia Securities Bhd.
The proposed special share dividend and the proposed final cash dividend of 24% less 25% tax are subject to shareholders’ approvals at the forthcoming AGM.
Ringgit weakest in more than a year versus Aussie
Ringgit weakest in more than a year versus Aussie
Tags: Australian dollar | Azrul Azwar | Bank Islam Malaysia Bhd | Bank Negara Malaysia | Canada | New Zealand | Ringgit | Weakest level
Written by Chong Jin Hun
Thursday, 08 October 2009 11:00
KUALA LUMPUR : The ringgit traded at its weakest level against a firmer Australian dollar in more than a year yesterday, after policymakers in Australia unexpectedly raised its key interest rate to 3.25% from 3%, prompting demand for the Australian dollar.
Investors tend to park their money in countries with higher lending rates to capitalise on higher returns.
The ringgit weakened as low as 3.0619 versus the Australian dollar at 5.10am yesterday before strengthening to 3.0432 at 10.16am. A day earlier, the ringgit was traded at 3.0587 against the Australian dollar, the weakest in 14 months since August 2008, compared to the 2.2824 level seen in February this year
Economists said the surprise move by Australian lawmakers could result in similar initiatives among other commodity-based economies such as New Zealand and Canada.
“Countries that may follow suit could be other commodity-based economies, “ Bank Islam Malaysia Bhd senior economist Azrul Azwar told The Edge Financial Daily yesterday.
In Malaysia, while commodities like palm oil, and oil and gas, constitute a crucial component of the nation’s economy, Azrul said the country should not be regarded as a commodity-based entity.
Meanwhile, an improving economic climate in Malaysia is expected to see a stronger a ringgit versus a weakening US dollar.
Azrul said as recovery in the broader landscape was still tentative, a rapid appreciation of the ringgit might have a negative impact on the nation’s export competitiveness. However, a stronger ringgit could be one of the contributing factors in containing imported inflation.
“With increasing signs of improving economic conditions in Malaysia, and expectation of a resumption of positive GDP (gross domestic product) growth by the fourth quarter of 2009, the way forward for the ringgit is to strengthen.
“I think it is prudent to let market forces dictate the level of the ringgit but at the same time we should exercise an orderly and gradual strengthening of the ringgit,” he said.
Bank Negara Malaysia had pegged the ringgit at 3.80 against the US dollar on Sept 2, 1998 during the Asian financial crisis then. The fixed-exchange rate policy was scrapped on July 21, 2005, and replaced by a managed-float system which allows the central bank to monitor the ringgit’s value against a basket of currencies.
An interest rate hike in the US would trigger a sharp rebound in the US dollar. In its latest “Standard Chartered Global Focus” report, the bank said it did not foresee US policymakers initiating a rate hike throughout 2010.
“We think this is unlikely. We also believe that the US and the UK will continue to run wide fiscal deficits through 2010 — far larger as a share of GDP than those in the EM (emerging-market) economies. This, combined with ultra-loose monetary policy, may put continued negative pressure on both currencies,” Standard Chartered said.
This article appeared in The Edge Financial Daily, October 8, 2009.
Tags: Australian dollar | Azrul Azwar | Bank Islam Malaysia Bhd | Bank Negara Malaysia | Canada | New Zealand | Ringgit | Weakest level
Written by Chong Jin Hun
Thursday, 08 October 2009 11:00
KUALA LUMPUR : The ringgit traded at its weakest level against a firmer Australian dollar in more than a year yesterday, after policymakers in Australia unexpectedly raised its key interest rate to 3.25% from 3%, prompting demand for the Australian dollar.
Investors tend to park their money in countries with higher lending rates to capitalise on higher returns.
The ringgit weakened as low as 3.0619 versus the Australian dollar at 5.10am yesterday before strengthening to 3.0432 at 10.16am. A day earlier, the ringgit was traded at 3.0587 against the Australian dollar, the weakest in 14 months since August 2008, compared to the 2.2824 level seen in February this year
Economists said the surprise move by Australian lawmakers could result in similar initiatives among other commodity-based economies such as New Zealand and Canada.
“Countries that may follow suit could be other commodity-based economies, “ Bank Islam Malaysia Bhd senior economist Azrul Azwar told The Edge Financial Daily yesterday.
In Malaysia, while commodities like palm oil, and oil and gas, constitute a crucial component of the nation’s economy, Azrul said the country should not be regarded as a commodity-based entity.
Meanwhile, an improving economic climate in Malaysia is expected to see a stronger a ringgit versus a weakening US dollar.
Azrul said as recovery in the broader landscape was still tentative, a rapid appreciation of the ringgit might have a negative impact on the nation’s export competitiveness. However, a stronger ringgit could be one of the contributing factors in containing imported inflation.
“With increasing signs of improving economic conditions in Malaysia, and expectation of a resumption of positive GDP (gross domestic product) growth by the fourth quarter of 2009, the way forward for the ringgit is to strengthen.
“I think it is prudent to let market forces dictate the level of the ringgit but at the same time we should exercise an orderly and gradual strengthening of the ringgit,” he said.
Bank Negara Malaysia had pegged the ringgit at 3.80 against the US dollar on Sept 2, 1998 during the Asian financial crisis then. The fixed-exchange rate policy was scrapped on July 21, 2005, and replaced by a managed-float system which allows the central bank to monitor the ringgit’s value against a basket of currencies.
An interest rate hike in the US would trigger a sharp rebound in the US dollar. In its latest “Standard Chartered Global Focus” report, the bank said it did not foresee US policymakers initiating a rate hike throughout 2010.
“We think this is unlikely. We also believe that the US and the UK will continue to run wide fiscal deficits through 2010 — far larger as a share of GDP than those in the EM (emerging-market) economies. This, combined with ultra-loose monetary policy, may put continued negative pressure on both currencies,” Standard Chartered said.
This article appeared in The Edge Financial Daily, October 8, 2009.
Kamdar ICULS to be suspended from Oct 23
Kamdar ICULS to be suspended from Oct 23
Tags: Kamdar Group (M) Bhd | Kamdar ICULS | Kamdar Sdn Bhd | Woo Hing Brothers
Written by The Edge Financial Daily
Thursday, 08 October 2009 00:45
KUALA LUMPUR: Kamdar Group (M) Bhd’s five-year 3% irredeemable convertible unsecured loan stocks 2004/2009 (ICULS) will be suspended from trading from Oct 23 to facilitate the conversion of the ICULS into shares. The ICULS mature on Nov 9.
In a circular to the ICULS holders on Oct 7, Kamdar, a textile retailer, said that after the maturity date, the ICULS shall cease to bear interest and the remaining outstanding ICULS would be automatically converted into new Kamdar shares on a one-for-one basis.
As at Sept 14, 2009, Kamdar had RM71.59 million nominal value ICULS outstanding. The ICULS, which have a nominal value of RM1 each, closed at 24.5 sen on Oct 7, while Kamdar shares were last traded at 27 sen.
The ICULS were issued on Nov 10, 2004, during the reverse takeover of Woo Hing Brothers Bhd by the Kamdar group.
In the reverse takeover, Woo Hing Brothers acquired the entire interests in Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar (Penang) Sdn Bhd, Kamdar (South) Sdn Bhd and Kesar Sdn Bhd for a consideration of RM196.43 million. The purchase was satisfied by the issuance of 124.43 million new shares of RM1 each and the RM72 million ICULS.
Woo Hing had also acquired 100% equity interests in Kamdar Holdings Sdn Bhd, Kamdar Stores Sdn Bhd and Mint Saga Sdn Bhd for a total RM60 million satisfied via the issuance of RM60 million nominal a value five-year 4% bonds together with 50 million detachable five-year warrants.
As a result of the exercise, the Kamdar group took over the listing status of Woo Hing and was admitted to the Main Board of Bursa Malaysia on March 29, 2005, when it closed at its highest level ever of RM1.45. However, the company’s share price has since plunged to the current level of 27 sen, and as a result, brought down the value of the ICULS as well.
For the second quarter ended June 30, 2009, Kamdar’s net profit rose to RM1.86 million on revenue of RM43.68 million, compared to net profit RM201,000 a year earlier. The company has a market capitalisation of RM34.13 million comprising 126.4 million shares. Its market capitalisation is set to expand following the conversion of the ICULS into shares.
http://www.theedgemalaysia.com/business-news/150852-kamdar-iculs-to-besuspended-from-oct-23.html
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Tags: Kamdar Group (M) Bhd | Kamdar ICULS | Kamdar Sdn Bhd | Woo Hing Brothers
Written by The Edge Financial Daily
Thursday, 08 October 2009 00:45
KUALA LUMPUR: Kamdar Group (M) Bhd’s five-year 3% irredeemable convertible unsecured loan stocks 2004/2009 (ICULS) will be suspended from trading from Oct 23 to facilitate the conversion of the ICULS into shares. The ICULS mature on Nov 9.
In a circular to the ICULS holders on Oct 7, Kamdar, a textile retailer, said that after the maturity date, the ICULS shall cease to bear interest and the remaining outstanding ICULS would be automatically converted into new Kamdar shares on a one-for-one basis.
As at Sept 14, 2009, Kamdar had RM71.59 million nominal value ICULS outstanding. The ICULS, which have a nominal value of RM1 each, closed at 24.5 sen on Oct 7, while Kamdar shares were last traded at 27 sen.
The ICULS were issued on Nov 10, 2004, during the reverse takeover of Woo Hing Brothers Bhd by the Kamdar group.
In the reverse takeover, Woo Hing Brothers acquired the entire interests in Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar Sdn Bhd, Pusat Membeli-Belah Kamdar (Penang) Sdn Bhd, Kamdar (South) Sdn Bhd and Kesar Sdn Bhd for a consideration of RM196.43 million. The purchase was satisfied by the issuance of 124.43 million new shares of RM1 each and the RM72 million ICULS.
Woo Hing had also acquired 100% equity interests in Kamdar Holdings Sdn Bhd, Kamdar Stores Sdn Bhd and Mint Saga Sdn Bhd for a total RM60 million satisfied via the issuance of RM60 million nominal a value five-year 4% bonds together with 50 million detachable five-year warrants.
As a result of the exercise, the Kamdar group took over the listing status of Woo Hing and was admitted to the Main Board of Bursa Malaysia on March 29, 2005, when it closed at its highest level ever of RM1.45. However, the company’s share price has since plunged to the current level of 27 sen, and as a result, brought down the value of the ICULS as well.
For the second quarter ended June 30, 2009, Kamdar’s net profit rose to RM1.86 million on revenue of RM43.68 million, compared to net profit RM201,000 a year earlier. The company has a market capitalisation of RM34.13 million comprising 126.4 million shares. Its market capitalisation is set to expand following the conversion of the ICULS into shares.
http://www.theedgemalaysia.com/business-news/150852-kamdar-iculs-to-besuspended-from-oct-23.html
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Exxon regains top ranking
Exxon regains top ranking
Tags: Exxon Mobil Corp | PetroChina Co | Ranking
Written by Joe Carroll & Edward Klump
Thursday, 08 October 2009 11:13
CHICAGO/HOUSTON: Exxon Mobil Corp regained its ranking as the world’s most valuable company, overtaking PetroChina Co after Chinese price controls failed to keep pace with rising crude costs, squeezing profits on refined fuels.
State-controlled PetroChina’s Shanghai-traded shares have dropped 2.2% since Sept 2, when the Chinese government last raised domestic prices for gasoline and diesel. Exxon Mobil rose 0.7% in the same period to a market capitalisation of US$330 billion (RM1.13 trillion), compared with US$325.5 billion for PetroChina.
Irving, Texas-based Exxon Mobil, which traces it roots to the 1880s and John D Rockefeller’s Standard Oil Trust, lost the top ranking to PetroChina on May 25, after China’s stimulus plan caused a surge in stock prices. PetroChina’s 14% return on capital is less than half of Exxon Mobil’s 36%, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg.
“Exxon is a solidly run company, one of the best managed companies out there,” said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Exxon Mobil shares and owns none. “It’s very conservatively run, has a good solid resource base, generally provides good returns to shareholders.”
Exxon Mobil’s annual sales are more than twice those of PetroChina. The company had US$425 billion in sales last year, or US$60.45 for every man, woman and child on the planet.
Exxon Mobil rose US$1.08, or 1.6%, to US$68.66 on Tuesday in New York Stock Exchange composite trading. PetroChina’s Shanghai shares haven’t traded since Sept 30 because of National Day holidays. The company’s Hong Kong shares climbed 2.8% to HK$9.16 (RM4.05) as of 11.24am local time yesterday.
Year to date, Exxon Mobil is still down 14%, the worst performance among seven integrated oil companies in the Standard & Poor’s 500. The company said Sept 9 that it may fail to meet its 2009 target for 2% output growth.
“My general view on Exxon is it represents a nice core holding in any portfolio that wants exposure to energy,” Weiss said. “You’re not going to get the best returns out of Exxon, but you’re not going to get the worst, either.”
Oil futures traded in New York have jumped 60% this year, heading for the biggest gain in a decade amid signs that demand for petroleum-based fuels such as gasoline is rebounding after a recession-driven collapse. China has allowed filling stations to raise gasoline and diesel prices this year by 19% and 18%, respectively.
China, which ranks behind only the US in energy consumption, on Sept 30 withdrew 37% of the fuel-price increase granted on Sept. 2.
The government has raised fuel prices four times and lowered them on three occasions this year under a system introduced in December to take into account fluctuations in the costs for oil purchased by refiners, according to the National Development and Reform Commission. The government policy allows prices to be changed when crude costs fluctuate more than 4% over 22 working days.
The Shanghai Composite Index, which jumped 87% in this year’s first seven months, has fallen 19% since then. The Dow Jones Industrial Average of 30 blue-chip US stocks, including Exxon Mobil, has risen 6.1% since the end of July. — Bloomberg
This article appeared in The Edge Financial Daily, October 8, 2009.
Tags: Exxon Mobil Corp | PetroChina Co | Ranking
Written by Joe Carroll & Edward Klump
Thursday, 08 October 2009 11:13
CHICAGO/HOUSTON: Exxon Mobil Corp regained its ranking as the world’s most valuable company, overtaking PetroChina Co after Chinese price controls failed to keep pace with rising crude costs, squeezing profits on refined fuels.
State-controlled PetroChina’s Shanghai-traded shares have dropped 2.2% since Sept 2, when the Chinese government last raised domestic prices for gasoline and diesel. Exxon Mobil rose 0.7% in the same period to a market capitalisation of US$330 billion (RM1.13 trillion), compared with US$325.5 billion for PetroChina.
Irving, Texas-based Exxon Mobil, which traces it roots to the 1880s and John D Rockefeller’s Standard Oil Trust, lost the top ranking to PetroChina on May 25, after China’s stimulus plan caused a surge in stock prices. PetroChina’s 14% return on capital is less than half of Exxon Mobil’s 36%, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg.
“Exxon is a solidly run company, one of the best managed companies out there,” said Philip Weiss, an analyst at Argus Research in New York who has a “buy” rating on Exxon Mobil shares and owns none. “It’s very conservatively run, has a good solid resource base, generally provides good returns to shareholders.”
Exxon Mobil’s annual sales are more than twice those of PetroChina. The company had US$425 billion in sales last year, or US$60.45 for every man, woman and child on the planet.
Exxon Mobil rose US$1.08, or 1.6%, to US$68.66 on Tuesday in New York Stock Exchange composite trading. PetroChina’s Shanghai shares haven’t traded since Sept 30 because of National Day holidays. The company’s Hong Kong shares climbed 2.8% to HK$9.16 (RM4.05) as of 11.24am local time yesterday.
Year to date, Exxon Mobil is still down 14%, the worst performance among seven integrated oil companies in the Standard & Poor’s 500. The company said Sept 9 that it may fail to meet its 2009 target for 2% output growth.
“My general view on Exxon is it represents a nice core holding in any portfolio that wants exposure to energy,” Weiss said. “You’re not going to get the best returns out of Exxon, but you’re not going to get the worst, either.”
Oil futures traded in New York have jumped 60% this year, heading for the biggest gain in a decade amid signs that demand for petroleum-based fuels such as gasoline is rebounding after a recession-driven collapse. China has allowed filling stations to raise gasoline and diesel prices this year by 19% and 18%, respectively.
China, which ranks behind only the US in energy consumption, on Sept 30 withdrew 37% of the fuel-price increase granted on Sept. 2.
The government has raised fuel prices four times and lowered them on three occasions this year under a system introduced in December to take into account fluctuations in the costs for oil purchased by refiners, according to the National Development and Reform Commission. The government policy allows prices to be changed when crude costs fluctuate more than 4% over 22 working days.
The Shanghai Composite Index, which jumped 87% in this year’s first seven months, has fallen 19% since then. The Dow Jones Industrial Average of 30 blue-chip US stocks, including Exxon Mobil, has risen 6.1% since the end of July. — Bloomberg
This article appeared in The Edge Financial Daily, October 8, 2009.
Tanjong: Good bet for more gains
Tanjong: Good bet for more gains
Tags: InsiderAsia | Tanjong plc
Written by InsiderAsia
Thursday, 08 October 2009 16:10
THERE are growing concerns that the rally in global stocks has been too fast and has run ahead of underlying fundamentals. For instance, the current average price-to-earnings (P/E) valuation of roughly 17-18 times 2009 earnings for the local bourse does appear stretched.
While stock markets have remained very resilient so far, we may be in for a period of consolidation — pending more concrete evidence of a sustainable global economic recovery. That is not to say no gains can be made. But with the low-hanging fruits picked, investors would have to be more selective.
Very attractive valuations
Tanjong plc (RM15.50), we believe, is one good bet for further upside gains from hereon.
Its shares are trading at only 9.5 times our estimated earnings of 163.2 sen per share for the financial year ending January 2010 — making it one of the most attractively valued big-cap, blue-chip stocks currently listed on Bursa Malaysia.
At the same time, the stock also pays attractive dividends. We estimate dividends per share to total RM1 for the current financial year. That will earn shareholders a gross yield of 6.5% — well above prevailing bank deposit rates and the broader market's average yield.
We foresee limited earnings downside risks for the company given that Tanjong's key businesses are relatively defensive in nature.
Sustainable power earnings, upside from new acquisitions
Power is the largest earnings generator. The business accounted for about 79% of Tanjong's earnings before interest and taxes (EBIT) in 1HFY10.
Contributions from the local power assets recovered from the various one-off expenses, including major maintenance, unscheduled outages and development costs writeoffs incurred in the previous corresponding period.
Meanwhile, earnings from Tanjong's power-generating subsidiaries in Egypt and Bangladesh expanded at a steady and sustainable pace, accounting for more than half of total EBIT for the power arm. Pre-tax profit for its power-related associates was also higher at RM37 million in 1HFY10, up from RM28.4 million in 1HFY09.
We do not expect any material variation in 2HFY10. Looking further ahead, its power earnings are sustainable — with the additional upside potential from new acquisitions.
Solid NFO franchise
Luck continued to favour Tanjong's numbers totalisator business (NFO) in 2QFY10. Prize payout in the latest quarter averaged at just about 61.1%, slightly lower than the 62.5% in 1QFY10. By comparison, prize payout averaged around 65% in 1HFY09.
The lower prize payout translated into another good quarterly earnings for the company. EBIT totalled RM156.8 million in 1HFY10 compared to RM123 million in 1HFY09 — despite weaker turnover per draw, which fell by about 3.3% during the period, likely due to a combination of factors including weaker consumer spending, greater number of draws and the rise in illegal betting.
Outlook for the NFO franchise remains positive. But earnings in 2HFY10 may be lower than that in the first half of the financial year, where prize payout has averaged below the more typical 64%-65% ratio.
Good earnings from the NFO arm offset losses for its other gaming unit, the racing totalisator (RTO) business. The company is working to reduce expenses and pare losses but the unit will stay in the red in the foreseeable future.
Earnings from the power and gaming businesses are fairly steady and predictable, as are those from the property and TGV cinemas businesses. As such, the biggest concern for investors is probably Tropical Island.
Tropical Island's losses not material
The resort is likely to stay in the red until plans to develop onsite accommodation come to fruition. Those plans were delayed by the global downturn and tight credit market conditions. The first phase, to build up to 425 villas and related facilities, is now slated for completion by end-2011.
Nonetheless, losses have been pared down substantially with improved cost controls and management, as well as the successful implementation of additional facilities within the resort over the past two years.
Losses before interest and tax (LBIT) narrowed to just RM4.3 million in 1HFY10 compared to RM15.5 million in the previous corresponding period. We estimate losses in the region of RM16 million for the full year. To place that into perspective, Tropical Island's losses are marginal compared to Tanjong's estimated EBIT of RM1.26 billion in FY10.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
Tags: InsiderAsia | Tanjong plc
Written by InsiderAsia
Thursday, 08 October 2009 16:10
THERE are growing concerns that the rally in global stocks has been too fast and has run ahead of underlying fundamentals. For instance, the current average price-to-earnings (P/E) valuation of roughly 17-18 times 2009 earnings for the local bourse does appear stretched.
While stock markets have remained very resilient so far, we may be in for a period of consolidation — pending more concrete evidence of a sustainable global economic recovery. That is not to say no gains can be made. But with the low-hanging fruits picked, investors would have to be more selective.
Very attractive valuations
Tanjong plc (RM15.50), we believe, is one good bet for further upside gains from hereon.
Its shares are trading at only 9.5 times our estimated earnings of 163.2 sen per share for the financial year ending January 2010 — making it one of the most attractively valued big-cap, blue-chip stocks currently listed on Bursa Malaysia.
At the same time, the stock also pays attractive dividends. We estimate dividends per share to total RM1 for the current financial year. That will earn shareholders a gross yield of 6.5% — well above prevailing bank deposit rates and the broader market's average yield.
We foresee limited earnings downside risks for the company given that Tanjong's key businesses are relatively defensive in nature.
Sustainable power earnings, upside from new acquisitions
Power is the largest earnings generator. The business accounted for about 79% of Tanjong's earnings before interest and taxes (EBIT) in 1HFY10.
Contributions from the local power assets recovered from the various one-off expenses, including major maintenance, unscheduled outages and development costs writeoffs incurred in the previous corresponding period.
Meanwhile, earnings from Tanjong's power-generating subsidiaries in Egypt and Bangladesh expanded at a steady and sustainable pace, accounting for more than half of total EBIT for the power arm. Pre-tax profit for its power-related associates was also higher at RM37 million in 1HFY10, up from RM28.4 million in 1HFY09.
We do not expect any material variation in 2HFY10. Looking further ahead, its power earnings are sustainable — with the additional upside potential from new acquisitions.
Solid NFO franchise
Luck continued to favour Tanjong's numbers totalisator business (NFO) in 2QFY10. Prize payout in the latest quarter averaged at just about 61.1%, slightly lower than the 62.5% in 1QFY10. By comparison, prize payout averaged around 65% in 1HFY09.
The lower prize payout translated into another good quarterly earnings for the company. EBIT totalled RM156.8 million in 1HFY10 compared to RM123 million in 1HFY09 — despite weaker turnover per draw, which fell by about 3.3% during the period, likely due to a combination of factors including weaker consumer spending, greater number of draws and the rise in illegal betting.
Outlook for the NFO franchise remains positive. But earnings in 2HFY10 may be lower than that in the first half of the financial year, where prize payout has averaged below the more typical 64%-65% ratio.
Good earnings from the NFO arm offset losses for its other gaming unit, the racing totalisator (RTO) business. The company is working to reduce expenses and pare losses but the unit will stay in the red in the foreseeable future.
Earnings from the power and gaming businesses are fairly steady and predictable, as are those from the property and TGV cinemas businesses. As such, the biggest concern for investors is probably Tropical Island.
Tropical Island's losses not material
The resort is likely to stay in the red until plans to develop onsite accommodation come to fruition. Those plans were delayed by the global downturn and tight credit market conditions. The first phase, to build up to 425 villas and related facilities, is now slated for completion by end-2011.
Nonetheless, losses have been pared down substantially with improved cost controls and management, as well as the successful implementation of additional facilities within the resort over the past two years.
Losses before interest and tax (LBIT) narrowed to just RM4.3 million in 1HFY10 compared to RM15.5 million in the previous corresponding period. We estimate losses in the region of RM16 million for the full year. To place that into perspective, Tropical Island's losses are marginal compared to Tanjong's estimated EBIT of RM1.26 billion in FY10.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
Public Bank an outperform, says Inter-Pacific Research
Public Bank an outperform, says Inter-Pacific Research
Tags: PBB
Written by Surin Murugiah
Friday, 09 October 2009 08:43
Inter-Pacific Research Sdn Bhd is recommending PUBLIC BANK BHD [] (PBB) as an outperform at RM10.40 with target price RM11.80, and said the bank's loans growth of 15% for FY09 seemed achievable.
The research house said on the back of high loans approval, up 17% year-on-year (y-o-y) to RM24.5 billion in 1HFY09, it expects PBB's full year loans to expand by 15% y-o-y from 19.2% y-o-y in FY08.
It said non-performing loans (NPLs) were expected to creep up slightly in 2HFY09 from loan defaults as PBB's organic loans that accounts for two-third of their total loans would be affected from the first two quarters of 2009 real gross domestic product (GDP) contraction.
"We project gross and net NPLs to be at 1.02% and 0.9% respectively in FY09, from 1.01% and 0.86% respectively in FY08," it said.
Inter-Pacific Research said PBB's net interest margin (NIM) would be compressed by 20-25 basis points in FY09 from the after effects of 150 basis points cut in Overnight Policy Rate (OPR) to 2% by Bank Negara.
But the drop in margins was compensated from the increase in hire purchase rates and corporate loans in March 2009, it said.
On the bank earnings, it said bottomline was projected to shrink by 13.1% in FY09 following compressed NIM and higher interest cost from raising RM1 billion of Non-Innovative Tier 1 Capital.
"But the bottomline should rebound by 9.5% in FY10 from stronger loans growth, lower credit charge off rate and higher contribution from non-interest income," it said.
Tags: PBB
Written by Surin Murugiah
Friday, 09 October 2009 08:43
Inter-Pacific Research Sdn Bhd is recommending PUBLIC BANK BHD [] (PBB) as an outperform at RM10.40 with target price RM11.80, and said the bank's loans growth of 15% for FY09 seemed achievable.
The research house said on the back of high loans approval, up 17% year-on-year (y-o-y) to RM24.5 billion in 1HFY09, it expects PBB's full year loans to expand by 15% y-o-y from 19.2% y-o-y in FY08.
It said non-performing loans (NPLs) were expected to creep up slightly in 2HFY09 from loan defaults as PBB's organic loans that accounts for two-third of their total loans would be affected from the first two quarters of 2009 real gross domestic product (GDP) contraction.
"We project gross and net NPLs to be at 1.02% and 0.9% respectively in FY09, from 1.01% and 0.86% respectively in FY08," it said.
Inter-Pacific Research said PBB's net interest margin (NIM) would be compressed by 20-25 basis points in FY09 from the after effects of 150 basis points cut in Overnight Policy Rate (OPR) to 2% by Bank Negara.
But the drop in margins was compensated from the increase in hire purchase rates and corporate loans in March 2009, it said.
On the bank earnings, it said bottomline was projected to shrink by 13.1% in FY09 following compressed NIM and higher interest cost from raising RM1 billion of Non-Innovative Tier 1 Capital.
"But the bottomline should rebound by 9.5% in FY10 from stronger loans growth, lower credit charge off rate and higher contribution from non-interest income," it said.
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